People find themselves struggling with money for all kinds of unexpected reasons. It only takes a few months for a couple of late payments to snowball into a seriously stressful situation. Once you miss payments, creditors start calling. Fees start building up. You could even wind up facing a creditor's lawsuit.
For those who can no longer keep up with financial obligations, bankruptcy relief may be the best option. Filing for bankruptcy helps stop collection activity. It also gives you a chance to rebuild fresh financial start. Knowing the biggest contributing factors to bankruptcy can also help you decide if you need this kind of relief in the future.
Losing your job can cause financial woes
It may come as little surprise that losing your job is one of the main causes of bankruptcy. Even if you qualify for unemployment coverage, there's likely a serious and immediate financial impact to job loss.
Unemployment will only offer a portion of the wages you've lost, which can mean you no longer have enough income to cover all your monthly payments. You may also have increased expenses related to COBRA insurance when you lose out on an employer-sponsored policy.
Overusing credit leaves some people overextended
Some people simply spend their way into a black hole. They may have intended to repay everything they borrowed and pay for every item they bought, but little purchases add up over time. When your credit card balance is too high to pay off each month, you can easily find yourself falling behind.
Consumer spending in stores and restaurants isn't the only concern. You might use financing programs to pay for dental work, cosmetic medical procedures or even the purchase of a car or appliance for your home. All of those monthly payments together can wind up being overwhelming.
Divorce can prove financially destabilizing
There are several ways in which divorce impacts your finances. First of all, you will likely pay thousands of dollars in attorney fees and court costs. Then, you need to split assets acquired during marriage with your spouse (as well as divvy up all of the debts).
Finally, you may incur monthly costs in the form of spousal or child support. Depending on your divorce terms and financial situation, those payments could leave you in a hole that just keeps getting deeper.
Medical expenses can overwhelm anyone
Even if you have an insurance policy, chances are strong that you have co-payments, co-insurance and deductibles to pay out-of-pocket. That can amount to thousands of dollars. Getting injured or ill while out of town could also leave you paying substantial portions of your medical expenses for seeking care out of your network.
If you don't have insurance, any kind of medical event could leave you in a precarious position. Those bills add up quickly. Even a single surgery could end up costing more than you make in a year. Many people experience a combination of factors, such as job loss due to a medical event or credit card expenses building up after a divorce. Bankruptcy can provide relief for those in financial trouble.