These days, more and more people are looking for a solution to their overwhelming financial problems. Unlike previous generations, where the idea of filing for bankruptcy carried a great deal of stigma and only the most extreme situations would be considered bad enough to warrant legal proceedings to discharge debt, today bankruptcy is a common tool of “financial planning”. In cases where it seems impossible to pay off a debt or it may take ten years of real sacrifice to get the money owed, people choose bankruptcy to give themselves a second chance at life.
One of those seemingly hopeless situations that can lead someone to file for bankruptcy is overwhelming medical bills. It only takes one incident to suddenly find yourself in debt. An uninsured person who has a sudden heart attack and is hospitalized for a week or two can easily rack up over $100,000 in hospital and medical bills. Chances are, that person won’t be able to work for a while and the bills keep piling up. In such a case, this option makes sense.
Everyone has been affected in some way by the housing crisis. Whether they’re upside down, unable to pay the mortgage, or the home’s value has gone down, chances are your financial health has taken a hit to some degree. While bankruptcy may or may not save the house from foreclosure, it is a way to buy some time and eliminate other debts so they can make the payments and not be thrown out. If they have equity in the home and file Chapter 7, they will be allowed to keep the home and will not have to take out the equity to pay creditors.
Businesses are often started with good intentions but often fall short of expectations. Whatever the reason a business fails, there are usually more debts or liabilities than assets. To protect itself from lawsuits by creditors who have not received money owed to them, a business, partnership, or sole proprietorship may file for protection of some of its assets by filing for bankruptcy.
Finally, one of the most important reasons there are so many bankruptcy filings is because they are a legal and acceptable way to get rid of unsecured debt and start over from scratch. Many people would rather have a bankruptcy on their records for seven years than deal with a mountain of debt. Usually, within a year or two of the resolution of the case, credit can be rebuilt and their lives can return to normal.