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Bankruptcy Attorney Jamie Ryke of the Second Start Bankruptcy Law Firm talks about the Truth about Bankruptcy. Find out how we can help you get out of debt and get a fresh start by filing either a chapter 7 or chapter 13 bankruptcy.

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The Office – Michael Scott declaring bankruptcy.

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The pressure of the economic crisis is being felt across the nation and increasing the chances that those who are hanging on for dear life to what they have in reserves and are still managing to pay their bills, to consider bankruptcy as an option should they lose their jobs. Among the major causes of bankruptcy today we have loss of employment, which can often lead to an increase in credit card debt. The looming economy is certainly no shy contributor to the pinch all consumers are feeling today.

Some may wonder, why can’t people just pay their bills? Often those who are more fortunate are quick to pass judgment against those who have filed or are in danger of filing bankruptcy. There’s certainly a disconnect in the perception of economic status across all classes. No one ever plans for this, there are just too many special circumstances around each person who files bankruptcy that leads them this way.

Major Causes of Bankruptcy

Unemployment - All throughout 2008 businesses began slowing down and plans for expanding were halted, particularly for the bigger companies. Local business in every town across the country were hit first, overall causing massive layoffs.

Foreclosures and Balloon Mortgages – In previous posts we discussed how these types of loans were a major cause of bankruptcy for many since the housing market begain its collapse. Many who managed to hang on and continue paying their mortages for the last year are starting to follow the path that millions of others have taken to relieve themselves of the burden of these subprime mortgage loans.

Medical Expenses – This particularly applies to those who are unemployed, if savings is able to get families by on living expenses and minor costs, medical expenses would certainly put a significant burden on the financial stability of the unemployed.

Divorce - The rate of divorce has always been high in the U.S. the current enconomy is perhaps a major cause of divorce rates in 2008 going into 2009. Because divorces often involve common property and debt, filers often find themselves in need of filing bankruptcy to rid themselves of bad debt and start all over.

Other less obvious causes of bankruptcy may include, having your identity stolen and not being able to resolve the crime, it’s rare but it does happen. Risky investments, such as over hyped stocks and foreign trust funds etc.

How can bankruptcy help me in this Economy?

Regardless of the state of the economy, if your debts are keeping you up and you’re simply not able to sustain a comfortable living, you may very well need to consider this option. Only a qualified attorney can determine for you whether you qualify to file and discharge your debts.

The current economy gives everyone the impression that worse days are ahead, it’s only natural to assume the worst, but carrying your debts along into worse economic times will only prove disastrous for you. When you’re no longer able to pay your bills, if you have not filed for bankruptcy protection your creditors are legally allowed to come after you. Once collections agencies begin harrasing you, you’ll know that it’s time seek protection under bankruptcy.

Whatever the causes of your financial burdens are, bankruptcy protection is a right extended to all US citizens by the federal goverment and it is a bailout that has helped millions of people get a second chance in their finances.

Going bankrupt is very common these days, most everyone knows or has heard of someone who’s had the misfortune of filing bankruptcy. There is a long list of reasons for this, however the most prominent are loss of job, unexpected medical bills, becoming disabled and of course the housing market crash which inevitably left a great number of home owners with high interest rate loans they could no longer afford. Desperate times cause many people burdened by overwhelming debt to commit fraud while filing bankruptcy, by not reporting all assets or disclosing their true financial state.

Personal bankruptcy is a way for a citizen to legally find relief from debt, these are the rights that have been extended to all Americans by the Federal government. However within these laws also exist specific qualifications rules, which can not guarantee that all who are ridden with debt will be able to benefit from these bankruptcy laws. Causing some to get creative or seek advice from the wrong sources about how to get around the system and appear to be going bankrupt.

This of course has serious consequences, since almost always, the fraud will be detected and stopped before the case is dismissed.

Those who are legitimately going bankrupt have some options when dealing with their debts and debt collectors. Despite the benefits the filers gain from filing bankruptcy, they often remain wary of the effects that personal bankruptcy leaves on their records, which lasts from 7 to 10 years. During this time potential filers may not realize that bankruptcy is in fact a good option, so they may follow the wrong advice and opt for debt consolidation instead in order to avoid bankruptcy, this is not necessarily a good option in most cases.

Debt consolidation can make sense in some cases, if the debt is mostly unsecured, meaning mostly credit card debt, this typically makes you a good candidate for debt consolidation if you’re still able to make your payments on time. However debt consolidation is not a comparable option to filing bankruptcy. The benefits of filing bankruptcy far outweigh those of debt consolidation for a few reasons.

When you being to accumulate debt, not only unsecured debt, but secured loans, mortgage debt, personal debts etc. Your ability to pay all these debts suffers severely when you lose your job or your main source of income disappears. Even in situations like this you may be hear the advice of debt consolidation specialists that grouping all your bills into one is a good idea. It is not.

Going bankrupt means losing the ability to pay your creditors at all, not necessarily struggling to pay them each month. Both are good reasons to file bankruptcy, however neither is a good reason to simply opt for debt consolidation and the reason why is that under bankruptcy you have certain legal rights that no debt consolidation agency can extend to you. Such as the power of the automatic stay, which provides a shield of protection from creditors, meaning no one can harass you and try to collect from you while you’re in the process of discharging your debts.

Depending on which chapter you file, you may either fully discharge your debts or establish a repayment plan that allows you to repay your debts in a period of 3 to 5 years. In some cases your overall balances may be decreased or interest eliminated.

It’s not easy to accept that you’re going bankrupt but it needs to be clear to you that you have legal rights that can protect you from creditor harassment and if you can not make your payments anymore, then bankruptcy is something you need to consider. Start by contacting a lawyer in your area. Also remember that bankruptcy consultations should be free, so find a legal office that does not charge for this.

While loss of employment remains the number one cause of bankruptcy right now, when people lose their jobs they almost always also lose their health insurance benefits that they used to get through their employer. This often creates medical debt and it is something that often leads families and individuals to bankruptcy.

Medical bankruptcy is due to rise as the economy continues to worsen and more people find themselves without work. Bankruptcy provides an exit for people who accumulate medical debt the same way it does for those who accumulate consumer debt and are unable to pay for it.

The changes implemented in the bankruptcy code in Oct of 2005 were supposed to discourage consumers from filing chapter 7 bankruptcy and for a while it was so. It was also supposed to discourage and eliminate bankruptcy fraud. So most consumer bankruptcy files ended up as chapter 13 cases which was clearly the intention of the law changes. However, the trend did not last long. Once the real estate market began to peak in 2006, more cases were starting to be filed again under chapter 7 bankruptcy. Three years after those changes occurred the economy has taken a serious downfall causing many businesses to downsize.

Although employees who are laid off are able to take advantage of COBRA benefits, which allows someone to continue paying their insurance premiums and stay with the same health insurance carrier for up to three months. At the end of three months if the unemployed person has not found work they’re simply dropped form the plan and can not continue their coverage unless they’re able to pay for the full premium themselves, which without steady income is highly unlikely.

Unlike consumer bankruptcy, which is often made up of credit card debt and not always out of need, medical bankruptcy comes out of necessity and it may also be paid for with credit cards if medicines and office copays are required.

The U.S. healthcare system provides for a lot of bureaucracy and inflated prices that are impossible to afford for the unemployed. Although the government extends benefits to the uninsured, it typically takes a while for someone to qualify for these benefits and when medical care is needed it needs to be paid for somehow or it can not be rendered.

More people will file bankruptcy due to medical bills in the next few years as the unemployment rate continues to sore. If the medical expenses were paid for using credit cards they can be completely discharged under chapter 7 bankruptcy and if the filer is still unemployed when filing their medical debt for discharge, it is unlikely that they will be met with any obstacles or be forced to restructure the debt under chapter 13 instead.

A steady climbing demographic in bankruptcy is that of more women filing bankruptcy than ever before. Women who file bankruptcy are single mothers, women who get divorced and those who become widows. Recent surveys indicate that close to 40% of bankruptcy filings in the U.S. today are made up by women.

Divorce is a growing reason for the increased bankruptcy filings as a whole, but because women typically win custody of their children in divorce proceedings, they normally don’t have the necessary income to support them properly and although they’re entitled to child support payments, this is not sufficient income to support kids, pay rent or mortgage and live a normal and comfortable life, so a lot of credit card debt is incurred in the process eventually leading to bankruptcy.

Women and bankruptcy has become more common today and if you’re a mother looking at a possible divorce, you need to make preparations for yourself. Take a close look at your over all debts, and make sure you have your own representation in court.

In order to avoid bankruptcy women should consult a financial advisor who will recommend strict steps you’ll need to implement to start setting money aside if you’re employed. If you’re not employed then it will behoove you to spend some effort to get a job before your divorce proceedings begin.

If you’re in danger of becoming a widow, you must have a clear understanding of the finances in your family if you’re currently not the person in charge of this. Your husband may know a lot about running the budget in your family but if you’re not currently involved in this, you’ll need to learn everything you can before the unthinkable does happen.

Bankrupt women are not a rare thing anymore, more and more women are joining the ranks of Americans who have had to take this route. So if you are concerned about your financial future should you end up alone for whatever reason, you need to consider the option of filing bankruptcy at some point in your life if you’re not employed and have a significant amount of debt.