There are many reasons someone may find themselves in enough debt to consider bankruptcy. While choosing to file for bankruptcy is a difficult decision, it's often one that can't be avoided. Here are three reasons many people use when choosing to file for bankruptcy.
1) They have an excessively high debt load. This can be from credit card debt, loans or even medical bills. Through a Chapter 7 bankruptcy with which the slate is effectively wiped clean or reorganization with a Chapter 13 filing, the person in debt can often benefit from the filing.
2) Many file to save their home from foreclosure. Filing for Chapter 13 bankruptcy will automatically stop a foreclosure on a home. The homeowner remains responsible for the amount borrowed, but the past due payments can be included in a repayment plan. The court must approve the plan however. In addition, many people use bankruptcy as a way to save their car and other property likely able to be repossessed.
3) Another common reason people file bankruptcy is when one or both workers in the home lose their job. In this case, they usually have financial obligations they can no longer meet. The typical person's lifestyle is guided by their income and with a sudden loss of employment it can be difficult to stay afloat financially.
Most debtors realize that they are financially in trouble well before they are filing for bankruptcy, but there are a few whose bankruptcy files showcase the fact that possibilities for avoiding this drastic step were not realized. Instead, a steady decline resulted in the dreaded filing and if the debtor had but pulled the fiscal emergency brake just a bit earlier, she or he might have avoided a long term mistake!
Here are some of the most commonly disregarded warning signs that - when observed carefully - may help you to get back on track: