Over the past several years, the number of people experiencing problems with debt across the country has increased substantially. In fact, U.S. bankruptcy court figures show that over 1.6 million people file for bankruptcy every single year. While there are many reasons why you might consider filing for bankruptcy in Arkansas, the six most common reasons why the average citizen files for bankruptcy might surprise you.
1. Medical Expenses
Bankruptcy is often portrayed as something that occurs if you are fiscally irresponsible, but you might be surprised to know that medical expenses represent 62% of today’s bankruptcy filings. Of these individuals, 78% have health insurance coverage, meaning that both insured and uninsured individuals filing bankruptcy around the country are feeling the weight of their medical bills.
Injuries and serious diseases can easily cost you thousands of dollars in hospital and doctor’s bills that deplete your savings and retirement accounts, home equity, and college funds. Even if healthcare insurance covers a percentage of your medical costs, your remaining bills might simply be too steep.
2. Reduced Income
In response to the current economic climate, your employer might have had to reduce expenses. As a result, you might be facing unforeseen pay cuts and benefit reductions. With many communities still experiencing job shortages, you may have to take a pay cut at a job that is below your income needs just to have a job. When personal income is cut but regular expenses and dependents remain the same, many become unable to pay bills and filing bankruptcy becomes the only option.
3. Job Loss
Loss of income can turn your family’s finances upside down. While you might be fortunate enough to receive a severance package, most become unemployed with little or no notice. Without an emergency savings account or other sources of income, some turn to credit cards to pay bills. Unfortunately, the longer you are unemployed, the higher the chances become you may not be able to pay your bills and keep creditors away. This easily leads to credit card debt or personal tax debt.
4. Irresponsible Spending
While unpredictable expenses are the largest causes of debt in America, sometimes irresponsible spending does prompt consumers to file for bankruptcy. It may not seem fair that those who use their credit cards to spend recklessly can “wipe their slate clean;” however, the most common reason why credit card debt becomes a problem is not frivolous spending. Many individuals below a certain tax bracket just live on tight budgets and max out credit cards to pay for basic necessities like food or unexpected expenses. When a better job or a tax return does not come, debt becomes an overwhelming cost of living.
A divorce can bring financial hardships for both parties involved. Legal fees might be substantial, dividing marital assets leaves fewer resources available for each individual, child support or alimony payments can be high, and the cost of maintaining two separate households is significantly higher. Given all of these costs, divorce leaves many with tighter finances and often causes people to consider filing for bankruptcy in Arkansas, where the divorce rate is 5.3% of the population.
6. Unexpected Expenses
Unexpected expenses can occur to anyone at any time. Your property may be destroyed because of a home burglary, a car accident, or a natural disaster such as a tornado or flood. If you are uninsured or your policy does not cover the extent of your damage, you might not have the money to replace your possessions, find alternative living arrangements, or purchase another vehicle. All these contingencies can lead to an unfortunate series of events that can sometimes end in bankruptcy.
When faced with any of these situations, consulting with an experienced bankruptcy attorney helps you tackle problems sooner and receive the funds you need faster. Take control of your financial situation now by contacting the attorneys at Nolan Caddell Reynolds at 866-242-0452.