If you’re considering filing bankruptcy, you’re not alone. More people in the United States are filing for bankruptcy than you may think. While filing for bankruptcy might seem like an overwhelming decision or process, there are a few reasons why bankruptcy could be a wise financial choice.
You Need to Pay for Medical Expenses
The American Journal of Public Health published a study in 2019 that revealed that 66.5% of U.S. bankruptcies occurred because of medical debt. Many individuals were unable to pay medical bills due to having to take time from work to heal from an injury or surgery or manage a chronic condition. Americans with health insurance can still be overwhelmed with medical debt, even if their policy offers copays and deductibles.
You Are Unemployed or Underemployed
Termination, resignation, and layoffs have become more common during the pandemic, which can be financially devastating. Some people are fortunate enough to receive severance packages from their employers, but it can still be jarring to receive a termination notice without warning. Individuals who don’t have an emergency fund for unexpected situations may start using their credit card(s) to pay bills, which can lead to more debt. A 2019 Financial Security Index Poll from Bankrate indicates that almost three of 10 people in the United States do not have an emergency fund they can turn to in the event of job loss.
You’ve Been Spending Excessively or Relying on Credit
If you find yourself bombarded with debt payment notices and credit card bills that you can’t manage, you may end up having to file for bankruptcy. In some instances, people will turn to debt consolidation to settle their obligations; however, this can be the first step down a long road to bankruptcy. Consolidation may be a short-term solution for unsecured debt. However, if the debt is still unmanageable due to underemployment or unemployment, this could lead to major problems like repossession or foreclosure.
Check with your local bankruptcy attorney or credit management company to determine if bankruptcy is a viable option for you. Once you have the answers and information you need about your options, you can start with a plan to get your finances on track.
This article is intended for informational purposes only and does not constitute legal advice.