After the housing bubble of the late 2000s, a dramatic increase in bankruptcy filings occurred. The housing crisis hit the South Florida area especially hard, as well as other states that experienced a large amount of real estate investment and speculation.
However, rising and falling markets generally aren’t to blame for most bankruptcies. Most bankruptcies occur due to one of these five reasons:
- Medical expenses--This is the number-one reason people go bankrupt, even when they have medical insurance. A study from Harvard University found that as many as 62% of all personal bankruptcies are due to medical expenses, and 78% of those were from individuals who had health care coverage.
- Job loss—Job loss hits doubly hard for many individuals, since in America your health care is tied directly to your job. Although COBRA coverage is available, many times it is not affordable, especially since you no longer have income. Some of those who lose jobs may get severance, but for those who don’t, the only form of income for a while may be filing for unemployment, which is only a fraction of what they previously earned.
- Excess use of credit—Debt can get the best of even the smartest people. When you can’t make ends meet, sometimes people would rather use credit cards than ask for help, which only makes the problem worse. Payday loans and title loans may appear to help in the moment, but in the long term they create more debt. If a borrower can’t obtain a debt-consolidation loan or negotiate other forms of relief, bankruptcy is often the only way out.
- Divorce—During the economic downturn, divorce rates went down. Not because people were happier with each other, but because they couldn’t afford a divorce. There are legal fees, division of assets, alimony, maybe child support, and then the cost of maintaining two separate households, and that makes divorce expensive to the point of bankrupting some families.
- Unexpected expenses—Disasters such as earthquakes, floods, or fires can be devastating if a victim is not insured. In many areas where these events are likely or common, you have to buy a separate, expensive policy to cover such events, and some residents aren’t aware of this until it’s too late. Even when your house burns down or is swept away in a flood, the mortgage is still due on the first of the month.
Please keep in mind that every case is different, so if you are thinking of filing bankruptcy, and would like to schedule a no-cost consultation, please contact our office by completing the form on this website or calling us at (954) 932-5377.