For many people, bankruptcy may seem like a personal failing. They may spend their time searching for what they could have done to avoid their financial problems. The fact is, however, that severe financial distress often has as much to do with bad luck as with any decision they made especially in circumstances beyond anyone’s control, such as the COVID-19 pandemic. Here are five common reasons people declare bankruptcy:
- Sudden medical expenses
- One of the primary causes of bankruptcy in the United States is the cost of medical care, especially costs from medical emergencies. Even with insurance, a trip to the hospital can easily leave someone with thousands of dollars in unexpected debt. Expenses from chronic medical conditions, such as cancer, can also lead to burdensome expenses that lead to financial distress.
- Natural disasters
- Another common cause of bankruptcy is the result of natural disasters, such as floods, fires, hurricanes, tornados, and earthquakes. These disasters can easily cause damage to your home, your car, and other valuables. If you are uninsured, or your insurance does not cover your losses, you could be left repairing the damage out of pocket, which could result in overwhelming debt.
- Divorce and separation
- Aside from all the other stress that is caused by divorcing or separating from your spouse, many people also find themselves struggling with their finances during and after the process. This can be due to a number of factors: losing your spouse’s income, potential child support or spousal support payments, and legal costs, just to name a few. Debt that may have been manageable as a couple can become overwhelming as an individual, especially when you add in the household disruption and animosity that follows.
- Loss of employment
- Losing your job is another common reason that people go bankrupt. The reason for this is simple: even without income, you still need to pay your bills, meaning you need to draw on your savings to survive. If you do not have savings, you will instead need to go into debt. Entitlement to government benefits, such as unemployment, does not last forever. If you already have substantial debt before you lose your job, or cannot find new employment soon enough, bankruptcy may become a reasonable option.
- Emergency repairs and maintenance
- Sometimes, the disaster that pushes you over the edge into severe financial distress is simply things breaking down. Car repairs, plumbing problems, electrical problems, and other maintenance issues can all result in thousands of dollars of unexpected expenses. If you do not have the money for these sudden necessary expenses, it may force you to take on debt you cannot afford. At that point, bankruptcy may be an option to handle your financial distress.
The Law Offices of Hunziker, Jones & Sweeney are experienced in helping families and individuals deal with the devastating effects of financial distress and in mapping out potential strategies, including the possibility of filing for bankruptcy, to help them cope and to see the light at the end of the tunnel. The attorneys at the firm understand that financial distress is an extremely emotional and difficult time for anyone to go through. If you are experiencing severe financial distress and may be considering bankruptcy as an option, or want to know more about what a bankruptcy filing may do to help you, call The Law Offices of Hunziker, Jones & Sweeney at (973) 256-0456 or fill out our contact form for a consultation.