One of the most persistent myths about bankruptcy is the idea that people who file for bankruptcy are simply lazy or didn't manage their money well. The reality is that most bankruptcies in the United States are caused by circumstances beyond the debtor's control.
Medical expenses, loss of income, and divorce top the list
If you can't keep up with your debts because life has dealt you a bad hand, you are not alone. Every year, thousands of hardworking people in South Carolina and across the country find themselves in need of a financial reset. If you are drowning in debt for one of these or another reason, there is hope, and a bankruptcy lawyer can help.
1. Medical expenses
According to one academic study, medical expenses were cited by about two-thirds of bankruptcy filers as a contributor to their bankruptcies, outpacing all other causes. As of 2020, Americans owed a total of at least $195 billion in medical debt, and that number is likely an undercount because some other types of debt are really medical debt in disguise. For example, some people with medical issues enroll in college and take on student debt primarily in order to get the student health insurance plan.
Medical issues can contribute to bankruptcy in other ways, as well. In particular, long-term or disabling illnesses can make it difficult to work and earn income, which can in turn make it difficult or impossible to keep up with your debt payments.
2. Job loss/income loss
Every year, one of the top causes of bankruptcy in the U.S. is loss of income. The majority of American families live paycheck to paycheck, so even a relatively short period of unemployment can put a great deal of strain on your finances. In a two-income household, keeping up with the mortgage, two car payments, and other necessities like groceries and medicine can become unaffordable when you go down to one income. Of course, in a one-income household, the loss of that income is still more devastating.
Moreover, because most people get their health insurance through an employer, job loss often also means loss of healthcare. At that point, it only takes one badly timed illness or injury to send your finances into a tailspin.
3. Divorce
It's perhaps unsurprising that bankruptcy and divorce are closely intertwined. First, many couples who divorce were having financial problems to begin with, since financial stress is one of the top causes of divorce. Second, the cost of divorce itself, plus the increased cost of living separately and paying child support and/or spousal support, can put you in an untenable financial position.
As we've written previously, there are several nuances to how bankruptcy interacts with divorce, including whether it's in your interest to file for bankruptcy before or after you divorce. If you are in this situation, an experienced attorney can help you find the best path forward.
If you need a financial reset, talk to a bankruptcy lawyer
Bankruptcy is rarely caused by just one thing. A combination of factors, including those listed above along with other personal circumstances, can combine to make your financial situation impossible to dig out of. This is why the bankruptcy process exists: to provide a fresh start.
If you are in overwhelming debt and considering Chapter 7 or Chapter 13 bankruptcy, our law firm would be honored to listen to your story and explain your options. Contact us today for a free, confidential consultation with Benjamin R. Matthews & Associates, LLC.