For millions of Americans bankruptcy is unthinkable. Maybe it is the idea of admitting defeat or some people think that it is for deadbeats who are trying to run out on their debts. However, there are times when bankruptcy is the best option. With that in mind, we will look at five conditions under which a bankruptcy is needed.
1. Retired with a Mountain of Debt and no Income
Bankruptcy isn’t just for businesses. In some cases, people work their entire lives and help to provide a better future for their families only end up with a mountain of bills and no income. According to a report from a professor at Michigan Law School, bankruptcies amongst senior citizens are amongst the fastest growing group in the country.
Granted this report was published in 2010, but the trend is clear. Millions of Americans have worked their entire lives only to see their retirements wiped out by the dot-com and housing busts, and the Great Recession.
One plus of filing for bankruptcy as a senior citizen is that the first $1.2 million in your IRA account is protected from bankruptcy. However, the process can be a bit tricky and you need to make sure you pick a good Chapter 11 bankruptcy attorney to help you with the process.
2. Drowning in Medical Bills
Obamacare (also known as the Affordable Care Act) was supposed to help, but as Bill Clinton recently said ‘it’s a crazy system.’ As Americans, we benefit from some of the best medical care in the world. However, it is also the most expensive. In fact, the problem is so big that debt from medical bills is growing faster than credit card debt. It has become so bad that more people are going into bankruptcy due to medical debt than ever before.
Even with insurance, co-pays and time lost from work can push up the cost of medical care in the U.S. For some people, filing for bankruptcy is the only option. The key thing to remember when considering bankruptcy is to make sure most, if not all, of your procedures, have been completed. If not, then you could end up coming out of bankruptcy with several medical bills remaining.
3. Credit Card Debt
This is probably one of the most common reasons why people get into financial trouble. Credit card debt has become so common in the U.S. that most people don’t even have $500 in their bank account to overcome an emergency. One of the signs you are in credit card debt is when you can no longer keep up with minimum payments. Even worse, some people use cash advances to pay their credit cards. This is very dangerous and never ends well.
If this sounds like you, then you need to consider bankruptcy. Just remember that you will need to sit down, list all your credit cards and other liabilities. In addition, make sure you have a complete understanding of your assets. A good lawyer will help, but you need to keep good records as well.
Using bankruptcy to get out of your obligations from a divorce is spurious at best, but sometimes it is necessary. This is especially true if your former spouse is using bankruptcy and it looks like you are going to left holding the bag. It is a nightmare situation and if this sounds like what you are going for, then you need to get professional advice.
Just remember, this is not a cut and dry situation. Bankruptcy during or after divorce requires a lot of attention to detail as you need to make sure there is no hangover which could come back to get you after proceedings are finished. One of the easiest ways to navigate this quandary is to file a joint bankruptcy, but this is not always an option. Especially if the divorce is extremely bitter. It would simplify everything and then allow you and your ex to move on with your lives.
5. Laid Off and In Debt
Over the past 30 years’ unemployment has become more common. There is no shame in being unemployed. Yet the challenge is that it always seems to happen at the worst possible times. This especially true if you are deep in debt and are facing an extended period of unemployment. First, you probably don’t have the saving to withstand six- to twelve-months of unemployment. Second, you want to make sure what little you have is there to help you through the lean times.
You might want to consider bankruptcy if you have recently been let go and have few options for a new job anytime soon. Here’s a tip, if you don’t meet the requirements for Chapter 7, then consider filing for Chapter 13. If you are unemployed, the odds are that the court will simply dismiss your debts.