The number of bankruptcy filings in the United States has steadily increased over the last century. The vast majority of bankruptcies are now filed by consumers and not by businesses. The state with the most bankruptcies in 2011 was California, with more than 240,000 filings. This accounted for 17 percent of all bankruptcies nationwide. California continues to remain the leading state for the number of bankruptcies filed.
People and entities declare bankruptcy for various reasons. This article discusses the five most common reasons for bankruptcy filings. Regardless of what reason you have for making the decision to file bankruptcy, it is best to consult with a Central Valley bankruptcy attorney to make sure your legal rights are protected.
1. Credit Card Debt
About 70% of adult Americans have one or more credit cards. Most Americans are in debt because of their reliance and use of credit cards. When an individual starts drowning in credit debt, it is difficult or nearly impossible for him or her to come out of the debt. One way to escape credit card debt can be to file bankruptcy. But it is important to note that this may differ on the facts of each specific case.
2. Medical Debt
According to a study published in early 2005, 46 percent of bankruptcies are related to outstanding medical conditions. The major cited reasons in this category included injury or illness, insurance carries not covering medical expenses, or losing more than two weeks’ worth of work due to an illness.
3. Home Equity Line of Credit Debt
Home Equity Line of Credit (commonly referred to as HELOC) is a type of loan that allows borrowers to borrow a line of credit up to a specific amount during a specific time period against their home loans. This is a quick way for most homeowners to accrue debt. When the loan payment starts and the homeowners cannot make their payments, they may have no choice but to file bankruptcy.
4. Mortgage Debt
Although most of the country, including California, has come a long way since the financial crisis of 2008, there are still millions of homes that are in danger of being foreclosed upon. Filing a Chapter 13 bankruptcy can prevent a home foreclosure.
5. Student Loan Debt
California is one of the top 20 states with the highest amounts of student loan debt. When students cannot repay their student loan obligations, they may turn to a bankruptcy filing as a way to get out of debt.
Call an Experienced Central Valley Bankruptcy Attorney
If you have already filed for bankruptcy or are planning to file for bankruptcy, it is important to immediately seek legal help. It may be in your best interest to consult with an experienced bankruptcy attorney to help you determine what the plan that best suits your specific needs.