Guess What Leads To Filing Bankruptcy?
By David M. Siegel
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.
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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