Bankruptcy is a rising trend, but what is it? Bankruptcy is a court-ordered process that may allow people to resolve their debt obligations. Commonly, people choose these two kinds of bankruptcy:
- Chapter 7: a liquidation process that assigns a trustee who sells a filer’s non-exempt assets to resolve debt with creditors
- Chapter 13: a reorganization process that allows filers to pay off their debt in several years and have the rest resolved afterward
While it’s often easy to understand what bankruptcy is, many people don’t know why someone would file. It’s often for a few common causes. Here’s what you should know:
Divorce
Many people get used to the idea that they have more leeway when making large purchases in a marriage. However, divorce can create a lot of issues, especially when it comes to finances. As a result of a divorce, people may find that not only do they have less wiggle room to make investments but they struggle to pay off the debt that they already owe.
Medical debt
Many people have medical emergencies, need surgery or treatments or have to take daily medication. However, any sort of medical attention can come with a large bill. In some cases, people aren’t able to pay their medical bills and, after accumulating late fees and interest, have to file for bankruptcy.
Credit card debt
People often find that they’re bombarded with credit card offers. While the idea that people could make investments now and pay them off later is enticing, it does come with a catch. Using credit cards can lead to overspending, which can make it harder to pay off the debt later.
If you find that you relate to one of the above causes as to why people file for bankruptcy, then you may need to know your legal options when resolving your debt obligations.
