Bankruptcy is not uncommon to American consumers. Even if one particular consumer has not filed, odds are high that he or she has a friend or family member who has before. Regardless of how common it is, it is still widely misunderstood. So, whether you are considering filing for bankruptcy yourself or if you have a family member weary about the process, it is best to speak with a professional to get all of the facts. An attorney can advise you about whether or not your situation qualifies, the type of bankruptcy that may be best, and many other aspects of the process.
Most importantly, an expert attorney will dispel any myths or inaccuracies that you’ve heard along the way. So, you will know exactly what you are getting yourself into.
1. Bankruptcy is Common
The number of bankruptcy filings in the U.S. has steadily increased from 1980 to 2005, according to Debt.org. They hit an all-time high in 2005, when there were more than two million cases started. In that year, it was estimated that one out of every 55 homes filed for bankruptcy.
Today, more consumers file for bankruptcy than businesses. California and Florida have the highest numbers, but these are also larger states with higher populations. Georgia, Illinois, and Ohio are the next runners up.
2. Bankruptcy Laws Are Federal Laws
Bankruptcy is the same no matter where you live, because it involves federal laws, not state laws. The cases are brought into federal court via the bankruptcy courts. While the courts are still located in your jurisdiction and state, they are federal courtrooms with a federal judge overseeing the case.
3. Americans Tend to Spend More Than They Earn
One reason for the increase in bankruptcy filings over the past few years is the fact that American families spend more than they actually earn per year. Americans are becoming buried and unable to pay off the debts.
4. The Causes of Bankruptcy Could Surprise You
Most people assume excessive debt is the only reason for bankruptcy. While debt is the ultimate cause, there are other common reasons why people file for bankruptcy, including:
- Medical injury or illness
- Job loss
- Sudden reduction in income
- Overextended on their credit cards
- Unexpected expenses
5. Tax Debts and Student Loans Cannot Be Discharged
It is a lesser known fact that student loans and tax debts cannot be discharged. With a majority of Americans suffering from these types of debts, it is important to know this if you plan to file for bankruptcy. More so, if you have back-owed child support or have a child support order in place, this cannot be discharged through bankruptcy, either.
Speak with a Bankruptcy Attorney to Get the Facts
There are plenty of information out there that can be misleading. Every bankruptcy case is different – if you intend to file for bankruptcy yourself, it is in your best interest to speak with an attorney first.