#1 Unexpected and Catastrophic Losses
If you were the victim of an accident that you weren't insured for such as a flood that devastated your home, you may have gotten deep in debt trying to cover the repair costs or fell behind on your mortgage because you had to rent another place to live. Likewise, a car accident or theft of your car that you were uninsured for that left you unable to go to work could also wreck your finances. Major financial losses can be very difficult to recover from and aren't something you usually have forewarning to prepare for – without an emergency fund, bankruptcy may be your best solution.
#2 Irresponsible Spending Habits
This is (surprisingly) not one of the leading causes of bankruptcy despite what you may think. It takes a lot more than just running up a couple of credit cards to wreck your finances. But there are some people that do overspend themselves into needing a serious solution like bankruptcy, it's just not the biggest reason for it. Those that do spend themselves into insolvency usually do it it on several fronts – they max out credit cards, take out a mortgage that's beyond their means, a car loan they can't afford or that, when taken all together, are just too much to afford on their wages.
#3 Gaps In Employment
Going without a job for a couple of weeks or even a month is a circumstance you can likely recover from without resorting to bankruptcy, even if you fall behind on your mortgage, car loan and other bills. But long-term unemployment is another story, particularly in North Carolina, where recent changes have drastically slashed unemployment benefits. The longer the unemployment lasts, the more difficult it is to recover. Most people erode their savings (if they had any) and run up credit cards to pay living expenses while unemployed. Bankruptcy offers a clean slate that can help.
#4 Divorce or Break-Up
The break-up of long-term relationships through divorce, for those married, or separation for those that were coupled and cohabitating can cause financial distress for both parties. Legal fees for divorce are costly and if there is a custody battle, can be overwhelming. Financing two households on wages that previously supported one is mathematically problematic for middle and lower income families. Division of debts may make it harder for one partner to thrive financially after the split. Alimony and child support can further complicate finances, but these aren't dischargeable in bankruptcy.
#5 Medical Costs and Illness
More than 60% of bankruptcy filers name medical costs as the culprit behind their financial problems. A serious accident or illness can quickly eat through your savings and can cause money problems even for those that have health insurance. In fact, nearly 80% of those that end up filing bankruptcy over their medical costs were insured. The Affordable Care Act may not even be a buffer against this type of bankruptcy because many plans under the ACA still carry stiff deductibles and out-of-pocket costs that can quickly add up to financial problems.
If you're dealing with any one of these issues, or a combination of them, bankruptcy may be the best solution to get you the financial fresh start you need. Medical bills, credit card debts and most other unsecured loans can be relieved in Chapter 7 and receive full or partial relief in Chapter 13 bankruptcy. Contact the law offices of John T Orcutt for a free consultation on filing a North Carolina bankruptcy and getting your financial recovery started.