Three reasons people file bankruptcy
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When people come into our law offices for a free North Carolina bankruptcy consultation, their finances are often in disarray because of a major life event. Some people have a negative perspective on bankruptcy and think it’s the result of sloppy financial habits. Sure, overspending and financial irresponsibility can cause problems, but that’s not what pushes your average consumer to bankruptcy. Here are the three most common life events that affect finances for the worse.
#1 Medical Expenses
Excessive medical debt is troubling because it can happen even if you’re insured. Today’s insurance plans often have hefty deductibles, copays, and coinsurance. Insurance is not a barrier to what is commonly known as a “medical bankruptcy.” What this means simply is that medical expenses are the primary financial obstacle you’re facing and the main source of your debt.
In some cases, all your medical debt might not be in the form of medical bills. Many people max out their credit cards paying medical bills, buying prescriptions, and other costs associated with a medical crisis. You might have drained your checking and savings and still have medical bills. Medical “debt” can come in many forms, and all can be financially debilitating.
It’s surprising the number of families that don’t have a safety net. A Motley Fool survey from last Fall showed that 70% of Americans have $1000 or less in savings. That’s shocking and shows why even a brief bout of unemployment can prove financially catastrophic to North Carolina families. You might even be saving for retirement in your 401(k), but that’s not easily accessible.
Without a financial safety net, even a few weeks of unemployment can wreck your finances and force you to run up your credit cards to stay afloat. When joblessness spans into months or even a year, you might exhaust your credit cards, fall behind on your mortgage and car note, dip into your home’s equity and other actions that can wreck your finances for years to come.
The average divorce rate in the U.S. is 40-50% of all marriages with higher divorce rates among those who marry again after an initial divorce. Also, North Carolina has a slightly higher rate of divorce than the U.S. average as a whole. Breaking up a marriage can be costly and financially crippling. If you’re already in debt before the split, you won’t be any less in debt after your marriage is done.
Debt and financial problems also make divorce more acrimonious than it needs to be and can make the aftermath of the split more difficult. Of the three main causes of bankruptcy, this is one you can address proactively when it comes to debt. If you file bankruptcy and then divorce, you and your soon to be ex can both get a fresh financial start as well as a clean break from the marriage. This can be a win-win.
North Carolina Bankruptcy Can Help
When it comes to medical bills, both Chapter 7 and Chapter 13 bankruptcy can be helpful. Chapter 7 wipes out all medical bills within just a few months plus credit card debt, some back taxes, and other selected unsecured debt. With Chapter 13, you can pay pennies on the dollar on medical debt and credit cards while having time to catch up on secured debt like your mortgage or auto loan.
Chapter 7 and Chapter 13 can also help with the debt that comes with job loss and unemployment. Once you have a new job, Chapter 13 can put you on a repayment plan to catch up on secured debt, and another option is to file Chapter 7 when you first get your new job to wipe out debt so you can enjoy the benefits of your new job without a mountain of debt weighing you down.
To find out more about the benefits of North Carolina bankruptcy, contact the Law Offices of John T. Orcutt. Call +1-919-646-2654 now for a free NC bankruptcy consultation at one of our convenient locations in Raleigh, Durham, Fayetteville, Wilson, Greensboro, Garner or Wilmington.