When you have overwhelming debts that you cannot pay, the pressure can quickly take a toll on your physical and emotional health and affect your personal and professional relationships. Bankruptcy is an option that allows you to obtain some type of fresh start and give you hope for your financial future. To decide whether it’s the right choice for you, it is important to understand what types of debt cause most people to file for bankruptcy.
Unexpected expenses that have not been budgeted for
You cannot control the weather or if a thief breaks into your home. If an earthquake, tornado or flood destroys your home, or a burglar vandalizes it, it may not be covered under your insurance. This means that you deal with the loss of your possessions and your home, and replacing it all on your own can lead to catastrophic debt.
Divorce proceedings or temporary separation
As the marriage is split in two, so are the finances. If you are separated, you may be paying for two different places to live, along with all the bills that come with it. This can quickly add up. If you are getting divorced, legal costs, child support and alimony can all drain your resources until you cannot keep up on your other obligations.
Excessive use of credit
Credit makes it easy to think you can afford more than you can. After all, you can have it now and pay for it later, right? Unfortunately, credit can quickly snowball and get out of control. When you cannot meet your monthly obligations to pay back what you have borrowed, you may be in trouble. High interest rates can also add to the debt and make it bigger.
Job layoffs or firing
Obviously, if you do not have a job, you cannot pay your bills. Unexpected layoffs or termination can lead to chaos when it comes to your finances, particularly if you do not receive a severance package of some type. Without an emergency fund to work with, debts pile up very quickly.
Excessive medical bills and expenses
The number one reason that people file for bankruptcy is medical expenses that they can’t afford. Around 62 percent of bankruptcy cases are filed for overwhelming medical bills. Even those with health insurance may file for bankruptcy because they cannot keep up on their bills.
If you are dealing with overwhelming, suffocating debt and are not sure where to turn, bankruptcy may alleviate your monthly obligations. Speak to an attorney quickly to determine what your options are.