The Most Common Causes Of Bankruptcy And Why It Does Not Matter

Does it matter why you filed bankruptcy?

Helping with Bankruptcy and Debt Reduction in Pierce County and Tacoma Washington

1. Medical Expenses

A study done at Harvard University indicates that this is the biggest cause of bankruptcy, representing 62% of all personal bankruptcies. One of the interesting caveats of this study shows that 78% of filers had some form of health insurance, thus bucking the myth that medical bills affect only the uninsured.

Rare or serious diseases or injuries can easily result in hundreds of thousands of dollars in medical bills – bills that can quickly wipe out savings and retirement accounts, college education funds and home equity. Once these have been exhausted, bankruptcy may be the only shelter left, regardless of whether the patient or his or her family was able to apply health coverage to a portion of the bill or not.

2. Job Loss

Whether due to layoff, termination or resignation, the loss of income from a job can be equally devastating. Some are lucky enough to receive severance packages, but many find pink slips on their desks or lockers with little or no prior notice. Not having an emergency fund to draw from only worsens this situation, and using credit cards to pay bills can be disastrous.

The loss of insurance coverage and the cost of COBRA insurance also drain the job seeker’s already limited resources. Those who are unable to find similar gainful employment for an extended period of time may not be able to recover from the lack of income in time to keep the creditors at bay.

3. Excess Use of Credit

Credit companies are aggressive in selling their credit cards, mortgages, and other forms of consumer debt. Credit card bills, installment debt, car and other loan payments can eventually spiral out of control, until finally the borrower is unable to make even the minimum payment on each type of debt. If the borrower cannot access funds from friends or family or otherwise obtain a debt-consolidation loan, which is usually not a realistic option, then bankruptcy is usually the inevitable alternative.

Statistics indicate that most debt-consolidation plans fail for various reasons, and usually only delay filing for most participants. Although home-equity loans can be a remedy for unsecured debt, such a loan turns unsecured debt which can be discharged in a bankruptcy proceeding, into secured debt that must be paid or the home can be lost in a foreclosure.

4. Divorce/Separation

Marital dissolutions create tremendous financial strain on both partners in several ways. First come the legal fees, which can be astronomical in some cases, followed by a division of marital assets, decree of child support and/or alimony, and finally the ongoing cost of keeping up two separate households after the split. The legal costs alone are enough to force some to file, while wage garnishments to cover back child support or alimony can strip others of the ability to pay the rest of their bills. Spouses who fail to pay the support dictated in the agreement often leave the other completely destitute.

WHATEVER THE CAUSE, those individuals or couples who are faced with a situation where they can no longer pay their bills and still support themselves or their families SHOULD NOT BE ASHAMED. What is done is done, and we are unable to change the past. Neither the staff at WASHINGTON FRESH START, or the bankruptcy trustee, are going to ask you how you arrived at the present situation, as our sole purpose and goal is to help you to obtain a FRESH FINANCIAL START!

Contact a Tacoma Bankruptcy Attorney Today!

STOP WORRYING, call us today at 253-284-9909, for a free consultation to have all of your questions answered and to determine if you qualify for immediate financial relief.