Steidl & Steinberg has helped over 50,000 people with debt problems for over 30 years. During those 30-plus years, certain patterns have emerged when it comes to things that trigger someone to file for bankruptcy. Below are the top five reasons we have found that drive someone to have to file for bankruptcy protection. This is not a scientific list but just our general impressions based on a whole lot of experience. Please note this list is not in any particular order.
1) Job Loss or Loss of Hours
Rare is it that someone can plan for job loss. Usually, it just happens. Whether you are laid off, or your employer closes up shop, or you have no idea why, it often comes out of the blue. Job loss often leads to extended periods of vastly reduced income. In this scenario, one of two things often occurs. First, you are now unable to pay your existing debts due to the reduced income. With the job it was fine, without the job it becomes impossible. Second, you need to use credit to survive during the period of reduced income and you get into debt. The kids need to eat and have a place to live. Sometimes in this scenario credit is the only option. Eventually, the amount of debt can mount to the point where a bankruptcy is necessary.
Illness is a big one. Medically induced bankruptcies occur in general because of very large medical bills that cannot be paid or the loss of income due to being off of work for extended periods of time. Recently, bankruptcy cases due to medical reasons have decreased for a number of reasons, but this is still easily in the top five.
3) Divorce, Separation, or Loss of a Spouse or Significant Other
Going from two incomes to one is rough. Instead of having two joint incomes for one set of expenses, now there are two separate incomes for two separate sets of expenses. Payment of debts with only one set of expenses wasn’t an issue but with two sets of expenses it sometimes becomes impossible. On top of that, in a contentious divorce, the legal fees can be very high and large lump sums are often necessary. While I said this list was not in any particular order, this may be number one.
4) Sheriff Sale of Home
Many bankruptcy cases are filed to halt a sheriff’s sale of a home residence. Many times a bankruptcy case is filed the day before the sale is supposed to take place! Once a sheriff’s sale of a piece of real estate takes place, there is nothing that can be done to overturn it. You can’t unring the bell. Specifically, Chapter 13 cases give a homeowner the ability to halt a sheriff’s sale and make payments over time to catch up on the back payments.
5) Business Failure
A failed (or failing) business can cause major problems for business owners for reasons that are pretty obvious. Decreased income, inability to pay business debts, all can lead to a bankruptcy filing either by the owner of the business or the business itself. Often times, both.
There you have it. The top five reasons that we see at Steidl & Steinberg that cause people to file for bankruptcy. If you are faced with a situation like this, and have debts that are causing problems, feel free to gives us a call to discuss your options.