What are some reasons that someone would file for personal bankruptcy when it is unnecessary or there was no need in the first place?
Personal Bankruptcy - What Are Some Common Reasons For Bankruptcy?
Personal bankruptcy is a legal process that helps people get rid of their debts. Common reasons that people file for bankruptcy include job loss, medical expenses, and unaffordable mortgages. Others experience financial hardship due to overspending or are struggling to support family members.
Job loss
Job loss is one of the most common reasons people file for personal bankruptcy. A job loss can be devastating financially, as you have no other means of income to cover your living expenses. The best way to protect yourself from this type of financial disaster is to have a safety net of some kind. While some people are fortunate enough to have an emergency fund or a severance package from their previous employer, many people are not.
A job loss can affect a person's ability to file under Chapter 7. For example, if you cannot pay your current bills because of a job loss, the trustee in your case may suggest that you switch to Chapter 13, where fewer of your debts will be discharged.
Health insurance
Health insurance is one of the most common reasons that people file for personal bankruptcy. It's estimated that approximately one-third of all filings are related to medical costs. The ACA has expanded healthcare coverage, but that doesn't mean that healthcare costs are less of a financial burden now than they were in the past. Uninsured people can quickly rack up huge bills.
One of the best ways to combat medical debt is to build an emergency fund. Many people end up spending their savings on their medical bills, so having a savings account for emergencies is essential. Having a little extra money in your emergency fund can help you pay your medical bills and still have enough money to support your family.
Medical expenses
One of the most common reasons that someone would file for personal bankruptcy is due to medical costs. This category of debt affects many people and is a huge contributor to the growing number of bankruptcies. According to a study conducted by Harvard University and former President Obama, out-of-pocket medical expenses account for 26% of all bankruptcies in low-income households. However, the study's findings are not as clear-cut as it first seems.
A recent study published in Health Affairs found that medical debt was one of the biggest reasons for bankruptcy. Medical debt can also lead to other financial problems such as reduced income, decreased savings, or even job loss. Most of these medical expenses are unexpected and can make a person's life miserable. In fact, one-fourth of people surveyed said they were unable to pay their medical bills because their insurance company had denied their claims.
Consolidation of debts
The consolidation of debts process can save a person time and money. By paying off all their debts into one account, the debtor can make one payment instead of several. They can also pay off their debt more quickly. This process is ideal for people with many credit cards or multiple student loans.
When a debtor files for bankruptcy, they will get a debt discharge, but they will lose some of their non-exempt possessions. These non-exempt possessions will be sold to pay off creditors. Depending on the state, these possessions may include a personal vehicle, home furnishings, or work-related items.
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