Bankruptcy can be an intimidating term for those who lack information about the process. There are many stereotypes surrounding the bankruptcy procedure.
It can help to take a look at the different types of people who file and the types of situations where bankruptcy arises. What are some of the more common situations where bankruptcy may apply?
Foreclosures
The majority of people take out some kind of mortgage when purchasing a home. Often, the lender will approve a loan based on affordability tests. However, it’s no secret that lenders haven’t always acted responsibly in this area.
If a borrower can no longer afford to make payments on their property, then foreclosure is a real possibility. This is a legal process whereby the lender tries to recover some or all of the debt by forcing a sale of the property. People facing this situation often file for bankruptcy.
Sadly, mortgage companies are not always careful enough with means testing. If someone has been approved for a loan that they have no realistic prospect of paying off, getting into debt is almost inevitable.
The job market
Like all markets, the job market can fluctuate. Some companies may thrive while others struggle. A company that is not profitable often has no option but to lay off workers.
As so many Americans rely on every paycheck, even missing one can result in serious financial difficulties. After an extended period of being unemployed, a person may have no option but to consider bankruptcy.
Medical expenses
Comprehensive insurance covers many medical bills, but it doesn’t necessarily cover everything. An individual may find themselves requiring treatment that falls outwith the scope of their policy. When this happens, they have a choice between not receiving the treatment they need or trying to scrape the money together through loans and savings. Many medical procedures cost tens of thousands of dollars or more.
The above issues have little to do with reckless spending, and they can affect us all. If you’re facing financial difficulties, seeking legal guidance can help to get you back on track.