Everyday, people contact attorneys to file Chapter 7 bankruptcy. While there are several reasons for doing so, the top five are:
- Medical Expenses – According to a study conducted at Harvard University, this is the number one reason for bankruptcy as it makes up 68 percent of the filings. Almost all filers had health insurance, but if someone has a rare or serious condition, it’s still expensive, especially if the co-pay is high.
- Job Loss – If people don’t have an emergency fund, it creates a bigger financial hardship if they lose their job. Many charge daily living expenses to their credit card and often find they can’t pay the bill when it arrives in the mail.
- Poor Spending Habits – This makes up about 15 percent of bankruptcy filings, and the reasons include large mortgages, expensive car payments, and credit card bills. When the borrower can no longer meet the monthly minimum payment for each debt, bankruptcy is often the only alternative.
- Divorce – The ending of a marriage can put financial stress on both parties. Some have to declare bankruptcy because of legal costs, while others declare due to garnishment of wages to pay back alimony or child support.
- Unexpected Expenses – This usually arises when there is a natural disaster such an earthquake or flood. Many homeowners don’t realize they need separate insurance coverage in order to receive money to pay for damage to their home or to replace belongings. Those who are not properly insured may face financial hardship trying to replace what was lost.