Bankruptcy can help you get out of debt, but it has serious consequences. There are many reasons why you can opt to file for bankruptcy when you are overwhelmed with debt. Some benefits of filing for bankruptcy include deterring creditors from aggressive collection action, canceling dischargeable debts, and maintaining your assets. Here are some situations where filing for bankruptcy can help.
Medical issues are one the biggest causes of applying for bankruptcy in the US. This is due to various reasons such as job loss, copays, and high deductibles. If you are suffering from a serious illness or injury, you could end up spending a lot of money on medical bills. This could clear out your retirement and savings accounts, leaving you with no cash. Even with health insurance, you may be unable to settle all your medical bills. In this situation, bankruptcy can be your only course of action.
A divorce or separation can cause significant strain on both parties in various ways. During a divorce, you will have to pay legal fees, which can be very high. After the settlement, there will be a division of marital assets, and depending on who wins the case, the highest earner will pay for alimony and child support. You may also have to move out of the house and continue paying for the expenses of the two houses. All these payments can make you unable to pay for your bills and file for bankruptcy law. If your partner is unable to pay for the alimony or child support, you may also apply for bankruptcy.
Losing a job or business which was your primal source of income can be devastating. If you do not have an emergency fund to cushion you during a financial crisis can lead to a mountain of debt. If you cannot secure a stable source of income for an extended period, you may have to file for bankruptcy to keep creditors at bay.
If you have poor spending habits, you may find yourself in a lot of debt. Common sources of debt include car loans and credit card bills. These loans can overwhelm you to the point of filing for bankruptcy. You can also have unexpected expenses such as property loss due to theft or disasters such as fire, floods, or earthquakes. If you are not insured, filing for bankruptcy can be your best option.
It’s good to note that some of the consequences of bankruptcy are damage to your credit score or losing control of your finances. However, if you are in any of these situations, filing for bankruptcy might be your only option.