With the increased costs of living and rising unemployment, most individuals have difficulty making ends meet. The majority of people are one paycheck away from financial disasters.
Declaring bankruptcy is an extreme measure, which can be time-consuming and costly, with a big impact on your credit score. Although it is normally the last option, several reasons can be necessary to file for bankruptcy. Some of these reasons include:
- Separation or Divorce
Marital dissolutions usually create financial strains on both partners in different ways. First come the astronomical legal costs in various cases, followed by division of alimony, a decree of child support, marital assets and ongoing expenses of maintaining the two separate households after splitting.
These costs alone are more than enough to force you to file for bankruptcy, while alimony or wage garnishments may strip others of the capability to pay bills. Spouses failing to give support dictated in the agreement may leave the other destitute.
Although it is advisable to have some money saved up to deal with unexpected emergencies, not every person can save cash. Emergencies may happen anytime.
Appliances in the house can go out and your car may break down. Whichever the reason, even with your emergency funds, these situations will still have catastrophic financial consequences.
- Medical Issues
Injury and illness are unexpected situations. However, when they come about, you must handle them diligently. Even with your health insurance, unexpected medical costs might quickly go out of control.
These situations can be frustrating. When considering the time that should be taken off of work, it is simple to see why trips to the hospital may lead to serious debt trouble.
- Job Loss
This is fairly obvious, though most individuals still think that people filing for bankruptcy have lived beyond their means. However, statistics paint a different picture.
One of the common reasons to file for bankruptcy is job loss and in these unprecedented times, people still suffer. Two-income homes reduced to live on one income usually find two notes and mortgage payments too much to service.
- Credit Problems
The availability of installment loans and credit cards causes most individuals to spend cash they don’t have. When this habit goes out of control, some might not make minimum payments on these debts.
Although a debt consolidation plan or home equity loan can manage those debts, most individuals choosing these solutions find themselves filing for bankruptcy.
- Relocating to Another State
When it comes to bankruptcy cases, you can still keep some properties provided they don’t exceed a particular dollar value. They are referred to as exempt properties or exemptions.
The bankruptcy laws enable states to decide the kind of property residents can be exempted from bankruptcy cases. Some states can be more generous compared to others.
For example, Texas allows unlimited value on homestead properties, which don’t exceed 200 acres in rural areas and 10 acres in urban centers.
Although bankruptcy can provide a sensible solution for some individuals, others have realized that consolidating debts may avoid the expense and trouble of bankruptcy and still manage to control their funds.
Whichever way works, the most vital thing to remember is dealing with your bankruptcy situation immediately since debt is one of the problems that cannot disappear on its own.