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Although there is a distinctive profile of someone in bankruptcy and certain life factors that make default more likely, no one is immune to severe financial troubles. 

Although there is a distinctive profile of someone in bankruptcy and certain life factors that make default more likely, no one is immune to severe financial troubles. 

The bankruptcy statistics in America are startling. Over the past years, the number of people who cannot pay off their debts has substantially increased. And the number of people filing for Chapter 7 bankruptcy across the United States has risen at a drastic rate. 

Most cases of bankruptcy are not caused by reckless spending but by financial hardship. Many lower-income individuals cannot afford to deal with unexpected major expenses such as job loss or medical bills. Peaks in bankruptcy petitions typically signify an economic downturn, and states with fewer consumer-friendly laws usually see the most filings.

Following is a list of the seven (7) most common causes of bankruptcy in America today.

1. Credit Problems. The easy availability of installment loans and credit cards causes many people to spend money they do not have. When this habit gets out of control, some may be unable to make even the least payment on these debts. While a debt-consolidation plan or home equity loan may help manage these debts in the short term, many people who choose these solutions eventually file for bankruptcy.

2. Job Loss. Losing a job can be devastating to a person’s finances. While some people may have received a severance package or an emergency fund on hand, most bankruptcy filers who have suffered unemployment did not have these safety plugs in place.

3. Medical Expenses. Medical expenses add up quickly, and often, many patients find that they cannot pay them. Medical expenses are among the very top reasons for filing bankruptcy. Severe illness or injury can affect anyone anytime and result in thousands of medical bills. Interestingly, not all those who filed for chapter 7 bankruptcy, citing medical expenses, were those without insurance. 

4. Overspending. And sometimes, crippling debt can be incurred as a result of overspending. Whether it is a result of inflation and poor budgeting skills or simply because you neglect to pay attention to what you spend, it can still send you crashing down unbelievably fast.

5. Divorce/Separation. From start to finish, divorce can be a costly experience. Legal fees can be expensive for both parties before piling on alimony, child support costs, and the new expense of maintaining two separate households. Suppose a person is unable (or unwilling) to make alimony or child support payments. In that case, they may experience wage garnishment, making them even less likely to be able to pay their debts. When one refuses to make these payments, it can also leave the receiver in financial trouble.

6. Unexpected Expenses. Natural disasters like tornadoes, hurricanes, earthquakes, property loss by theft, lack of insurance, and emergency savings can force people into bankruptcy. Property loss due to casualty or theft, such as earthquakes, floods, or tornadoes for which the owner is not insured, can force someone into bankruptcy.  

7. Home Utilities. It would help if you had heat, air conditioning, lights, electricity, and water in your home; these are essential utilities. However, the costs for these basic utilities are rising, and homeowners can no longer afford them, along with other essentials such as food and clothing. An inability to pay for your utilities may have you seeking out the services of a bankruptcy attorney rather quickly.

Closing Statement

There are many reasons why taxpayers are choose-to or forced to declare bankruptcy. But common sense, sound financial planning, and preparation for the future can often head off this problem before it becomes inevitable. Those contemplating this possibility should seek a credit counselor or financial planner before choosing this alternative since this is a significant decision that will have a lasting impact on your economic life. You must talk to a professional who can assess your situation and advise you on how best to get yourself out of debt. With over thirty (30) years of experience, Ronald E. Stadtmueller, a bankruptcy law specialist, and our experts at Stadtmueller Law Offices are the advocates you need. For your Bankruptcy Debt Relief in San Diego, call us at 858-564-9310 today and consider debt settlement and consolidation before turning to bankruptcy.

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