In order to know why people file for bankruptcy, one must first know what bankruptcy is. Bankruptcy, as defined by Nolo.com, is the process by which individuals and businesses clear debt with the protection of the federal bankruptcy court. Furthermore, there are two types of bankruptcies for which to file: liquidation and reorganization. Chapter 7 bankruptcy aims to liquidate or sell your assets to pay off the debt you owe. There are some assets, though, that are protected by state law and which are exempt from liquidation. Chapter 13, on the other hand, is geared more toward higher income individuals, and attempts to reorganize the debt into a three-to-five year repayment plan. Now that we have the basics down, let’s take a look at why someone might file for bankruptcy:
- Medical Bills – A recent Harvard study found that this is the biggest reason why people file for bankruptcy. It is a common myth that those who file because of exorbitant medical bills are uninsured. Quite the contrary, in fact, as about 78% of those who filed were insured. Expensive operations and rare diseases and conditions leave people with hundreds of thousands of dollars in medical bills, even after insurance has paid their dues, and some people find that bankruptcy may be their only relief.
- Unemployment – In today’s job market, it’s becoming increasingly harder to find work. And without a job, and therefore a steady source of income, it’s nearly impossible to pay your bills, and they will keep piling up. Is there any relief to be found? Filing for bankruptcy may be the answer. This way, you can attempt to clear your debts and stop the harassing phone calls.
- Divorce – Financial problems can be common among couples. And if they divorce, the problems are likely to linger, especially since, after the divorce, each person will only have half the income than they did when they were married. If your financial future looks worrisome after a divorce, consider filing for bankruptcy as a last resort to relieve yourself of the debt you owe.
There are many reasons why someone might file for bankruptcy, and no, it’s not always because they were reckless with their money. If you find yourself questioning how you’re going to pay off your debt, and there seems to be no relief in sight, bankruptcy may be the way to go. If such is the case, contact the Law Office of Barry Levine by phone at 978-922-8440 or by email at [email protected] to discuss your options.