Managing personal finances has continued to become more complicated over the past couple of decades. Most people have continued to see the costs of healthcare, housing, and education rapidly outpace the rise in average wages. This has put a lot of strain on individuals all over the country. For those that are struggling to pay off their bills and need a fresh start, filing bankruptcy is a good option to consider. The filling either Chapter 7 or Chapter 13 bankruptcy will find that there are various debts that are commonly included in the filing. There are several common sources of debt in particular that are included in bankruptcy filings.
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Common Sources of Debt in Bankruptcy
An accumulation of personal debt is often the primary cause of someone filing for bankruptcy. While all situations and reasons for the filing are different, there are several types of debt that are more common than others in a bankruptcy.
Medical Bills
One of the most significant financial challenges that someone can have is if they incur significant medical bills. The cost of healthcare in this country can be very significant and even those with good insurance can be left with bills that are unaffordable. For those that are seriously ill or injured could be left with a debt that seems impossible to repay. In most cases, this debt will be completely unsecured as well. Due to the significance of this debt, and the fact that it can come at an unexpected time, many people will file bankruptcy to have medical bills expunged.
Credit Card Debt
Due to rising expenses and stagnating wages, many people struggle to stay within their means. This is particularly true if they experience an unexpected financial emergency. In a lot of cases, the only way to pay their bills is by using credit cards, which also come with a lot of fees and high-interest rates. Due to these high costs of borrowing, credit card debt can balloon quickly, and paying it off can seem impossible. Due to this, many will choose to file bankruptcy to reduce their debt burden.
Unsecured Personal Loans
While credit cards are a common form of personal debt, another debt that is frequently included in bankruptcy filings is unsecured personal loans. While they can be more difficult to obtain than credit cards, some banks and non-traditional lenders do provide unsecured personal loans to their customers. Those that start to fall behind on payments may choose to file for bankruptcy as opposed to continuing to make past due payments.
Mortgage Debt
One of the most significant expenses that someone will have is their monthly mortgage payment. If you start to fall behind on payments, your lender will likely start the foreclosure process in which they will take title to the property. However, even if your property is completely foreclosed, there is a chance the lender can take a loss. In these cases, they may pursue you for the losses. This debt is frequently included in the bankruptcy filing.
Unpaid Bills
Those who are struggling to pay their bills will eventually have to decide which bills to pay and which to allow going past due. If you have continued to avoid paying certain bills, such as those owed to a utility company, the creditor will eventually seek repayment. This could then turn into a debt that you owe them. This could put a strain on anyone’s personal financial situation. These bills are another common inclusion and source of debt when filing personal bankruptcy.
Past Due Taxes and Fines
Paying taxes on an annual basis is a responsibility shared by all people. Due to the complexity of the tax code, preparing and saving for taxes can be challenging, and being surprised by an unexpected tax bill can cause a lot of strain. Taxes due to the IRS and state taxing authorities are often included in personal bankruptcy filings. Further, if you owe fines for past due taxes or other regulatory violations, you are permitted to include them in your bankruptcy filing.
Other Reasons People File for Bankruptcy
While significant bills are often a reason that someone may file for bankruptcy, there are other leading factors at well that can contribute to an increased chance of having to file. Some of the reasons that people file for bankruptcy include if they have lost a job or suffered an income setback, a loved one, and source of income passed away, new children added to the family or divorce. All of these expenses can drastically impact your income and personal monthly expenses, which can require you to take on more debt. If the impact lasts too long, it could also require you to file for bankruptcy in the future.
There are many situations in which filing for bankruptcy will be a great long-term financial decision. If you are looking for a way to restructure or restart your personal financial life, hiring a bankruptcy attorney is a great first step. For those that are in the area, the Cincinnati bankruptcy attorneys at Fesenmyer Cousino Weinzimmer can offer many services for you. This can include helping you understand if bankruptcy is right for you, what your options are, and what the process looks like. They can then help you properly file and give the support you need to ensure the process goes as smoothly as possible.