It often is the case that there is a job loss, followed by an inability to find work that pays nearly as well. If you have worked in a high income level and taken an hourly low income position, or found nothing at all because you are "overqualified", your loss of income is out of your control.
Medical expenses that are not reimbursed by insurance or government programs are a top reason for bankruptcy. It is not your fault and medical providers by federal law may not deny you treatment for the fact that you are filing bankruptcy.
Divorce or Legal Separation.
Divorce often leaves one swimming in debt. It may be that one was trying to keep up or trying to provide an acceptable standard of living. Regardless, divorce often leads to uncontrollable circumstances. It is almost always better to wait until the divorce is over before filing bankruptcy to make sure that the final court orders allocate who is responsible for which debt. It is "cleaner" this way. But, there are circumstances in which an earlier bankruptcy might be desirable.
Small Business Failure
Often people launch small businesses which for whatever reason fail. Sole proprietors do better in a chapter 7 or 13. However even if there is an LLC or other entity, banks and other lenders often require a personal guarantee, and your personal bankruptcy will discharge your personal liability for the business debt.
Consumer Spending Drives the USA Economy
About two-thirds of the U.S. economy is consumer spending. We are all pressured to buy buy buy. Just after 9/11 President George W. Bush urged Americans to spend more money as a way of boosting the economy and not letting the terrorists win. President Obama has urged consumer spending to remain high, as a way of shoring up the economy. American consumers follow this advice with a vengeance.
Consumers Give In To Pressure
Whether it is the friend, neighbor or other social contact that has the wide screen TV, new computer, latest cable/internet/high speed/recording and other technology, car, interior decorations or otherwise, often consumers simply cannot avoid family, social or other pressure to spend. Credit card offers are relentless. Plastic is offered on college campuses to teens with no income. There are stores where you can't check out without being pressured with the enticement of a discount for opening a new credit account if you have none with that store. Some of these cards charge 29% interest.
The easy availability of credit makes it easy for Americans to live well beyond their income level. When unexpected things go wrong, there are few alternatives. Illness, job loss and other factors leave people unable to hit the wall of unsurmountable credit payments.
Bankruptcy Is In The Bible
"1. At the end of every seven years you shall grant a release. 2 And this is the manner of the release: every creditor shall release what he has lent to his neighbor. He shall not exact it of his neighbor, his brother, because the Lord's release has been proclaimed." Deuteronomy 15, 1-2. This concept, spelled out in the Old Testament, clearly embraces the concept of bankruptcy.
Bankruptcy Is In the U.S. Constitution
Bankruptcy is firmly embedded in the U. S. Constitution. The same Constitution which gives us democracy and our freedoms of speech and religion also authorizes Congress to enact "uniform Laws on the subject of Bankruptcies." (Article I, Section 8.) In 1934, the U.S. Supreme Court explained bankruptcy law in these words: '[I]t gives to the honest but unfortunate debtor a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt." Local Loan Co. V. Hunt.
How Do You Spell Relief?
Potential bankruptcy filers often worry about their credit rating. It is true that under the 2005 revisions to the U.S. Bankruptcy Code, the filing of a chapter 7 bankruptcy can stay on a credit report up to 10 years. It is also true that most folks considering bankruptcy already have relatively bad credit. One could keep paying minimum payments or more for years, and simply "swim" in the interest and other charges, never reducing the principal. Bankruptcy will at least give the filer a fresh start. Secured creditors will continue giving loans, and unsecured creditors are increasingly giving fresh credit based on the fact that another chapter 7 can not be filed for a long time.
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