Can You Guess The Main Causes Of Bankruptcy Filings? There
are several common causes leading one to file bankruptcy.
These include, but are not limited to the following:
1. Lawsuits/Garnishments
Nobody wants to be sued and brought to judgment. Nobody
wants to have 10%-15% of their hard earned wages deducted
from their pay. In many cases, the taking of 10%-15% of
one's wages leads to the inability of that person to pay
his rent, utilities or auto payment. Just the thought of
the employer potentially having to garnish wages leads many
to panic. Debtors do not want their employers or
co-workers knowing of their financial troubles.
2. Auto Repossessions
Auto lenders will do whatever it takes to get you financed,
regardless of whether you are actually capable of affording
the car. They realize that if you can't pay the
installment, they can take back their vehicle and re-sell
it before it fully depreciates. They do this through the
use of auto auctions where the vehicle often sells for
substantially less than what is owed. This leads to a
deficiency amount which the lender seeks to recover from
the debtor.
3. Unpaid Medical Bills
With more and more Americans going without medical
insurance (45.8 million, per the U.S. Census Bureau press
release dated 8/30/05), they risk losing whatever they have
earned throughout their lifetime should a major medical
problem occur. Most claim that they can't afford to carry
medical insurance. In reality, they can't afford not to.
The rising cost of health care could significantly deplete
one's savings should a serious illness or injury occur.
Even those with co-payment coverages are having a difficult
time meeting their burden of the bill.
4. High Interest Loans
There have always been high interest personal loans from
many sources. In recent times, the advent of the payday
loan has surfaced. These loans have exorbitant interest,
which is often carried over and extended further by way of
additional loans. People who cannot survive until their
next payday are giving up a huge portion of their paycheck
to get the money in advance. This dangerous cycle leads to
further borrowing with less and less money actually going
into the individual's pocket.
5. Driver's License Suspensions
Many states have begun to suspend the licenses of drivers
who have been involved in auto accidents without insurance.
These drivers are typically given three options: Pay the
actual damages to the person(s) involved in the accident;
work out an installment payment plan to pay the damages to
the person(s) involved in the accident; or file bankruptcy
and send proof thereof to the motor vehicle licensing
department. If the person continues to drive without
rectifying the situation, they risk arrest and/or
imprisonment for driving on a suspended license.
6. Foreclosures
The pride and joy of being a homeowner can be easily
tempered by the hard work and cost of maintaining the home.
The mortgage needs to be timely paid no matter what your
special circumstance may be. Real estate taxes and
homeowner's insurance are also required to be paid
regularly or you face a foreclosure suit. Changes in
employment, health, income and marital status can lead to
one's failure to make timely payments. Many take second
mortgages or lines of credit which simply create an
additional, financial burden on the homeowner. When faced
with the reality that they cannot afford the home, debtors
can vacate the home and extinguish any mortgage liability
through Chapter 7 bankruptcy.
7. Overzealous Lending
How many credit card applications have you received in the
mail this year? If you are like many Americans, the
applications continue to appear regularly. Have you
received convenience checks or offers for additional lines
of credit? If so, you may have taken advantage of the use
of the credit without any feasible way of repaying the
debt. Many people are receiving pre-approved credit
applications when they are in fact, not credit worthy. The
credit card lenders point fault at the debtors for
accepting the credit without the means to repay it. It
seems more logical to fault lenders who do not undertake to
check the credit worthiness of particular debtors.
8. Consumer Overspending
Many people see what they want, acquire it, and decide
later how they will pay for it. People want to possess the
latest clothing, jewelry, electronics, etc. Most stores
now offer the ability to take the product home through the
use of store credit cards or outside financing. You may
even get a modest percentage discount off the purchase
price if you open or use the store charge card. Many
people charge their groceries, restaurant and
transportation expenses believing that if they just make
the minimum payments everything will be alright.
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David M. Siegel is the author of Chapter 7 Success: The
Complete Guide to Surviving Personal Bankruptcy. He is a
member of the American Bankruptcy Institute and currently
practices bankruptcy law in Chicago and its surrounding
suburbs. Additional information is available at
http://www.bankruptcy-lawyers-newyork.com .
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