The Top Ten Reasons for Bankruptcy

National Association of Consumer Bankruptcy Attorneys

The Top Ten Reasons for Bankruptcy

Brian V. Lee

April 26, 2010

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You have your own story, but so do we all. If you’re considering bankruptcy, you may feel isolated or uniquely afflicted. But you are not alone.

In fact, certain recurring circumstances lead people to file bankruptcy. Here are the top ten reasons for bankruptcy.

1. Debt

The primary goal of bankruptcy is to eliminate debt. In bankruptcy terminology this is known as a “discharge” of debts. By the time your bankruptcy case is closed, all or most of your debt should be eliminated.

2. Foreclosure

If your mortgage company has sent you a notice of foreclosure sale, you must act quickly. But bankruptcy stops foreclosure. If you want to keep your property, we will work together to find a repayment plan that works for you. If you are ready to let the property go, bankruptcy will discharge a possible deficiency judgment.

3. Job Loss

Even in a good economy, unemployment remains a common reason to file bankruptcy. Loss of income is often devastating. Instead of exhausting your savings or taking on more debt, consider bankruptcy as an option before you start a new position.

4. Lawsuit

Bankruptcy may be a good choice if you are facing a lawsuit for high damages. Bankruptcy effectively ends most lawsuits. And you could save a ton of money on legal fees. Consider bankruptcy if you are expecting a judgment and act before the judgment is entered.

5. Garnishment

Bankruptcy stops wage garnishment, and bankruptcy stops bank account attachment. Garnishment can make it impossible to pay your monthly bills. Bankruptcy immediately ceases garnishment. Either address the creditor on a more level playing field through Chapter 13, or discharge the creditor in Chapter 7.

6. Repossession

Car companies are quicker to repossess than mortgage companies are to foreclose. If you have missed payments on a vehicle, bankruptcy stops repossession. You can choose to repay the arrearage over time, or surrender the car in an orderly way. If you are facing repossession, you must act quickly to avoid excessive towing and storage fees, or worse, auction of the vehicle.

7. Debt Collection

Collection agents can be rude and relentless. Now, with the advent of skip-tracing, no one can evade debt collection. Creditors will call you incessantly at work, at home, and on your cell phone. Bankruptcy immediately stops debt collection.

8. Medical Bills

An unforeseen illness or accident can feel ruinous. Monthly payments often fall to the wayside when a family member faces the choice of either paying a creditor or health care. Bankruptcy may actually improve your credit if you owe large medical bills.

9. Student Loans

In most cases, student loans cannot be eliminated by bankrupcty. Student loan companies will try to establish with you the highest monthly payment possible. Bankruptcy can not only help you consolidate your student loan debt, but allow you to make a reasonable monthly student loan payment based on your disposable income.

10. Creditor Challenges

Sometimes creditors attempt collection on accounts that have already been paid. Creditors also often seek payment amounts higher than what you actually owe. Bankruptcy allows you to challenge miscalculated and fraudulent claims. And bankruptcy forces a creditor to prove via admissible evidence what you actually owe. Bankruptcy actually offers an extremely robust forum in which to challenge creditor claims.

If You are Facing One of the Top Ten Reasons for Bankruptcy

Do any of the reasons apply to you? Do you have a completely different reason? If you are considering filing bankruptcy, call an experienced bankruptcy attorney to discuss your options.