The word bankruptcy has a very negative connotation in our society, suggesting that the person filing for bankruptcy is financially irresponsible. Most people believe that overspending and money mismanagemen…t is the reason why people are forced into bankruptcy. However, that is far from the truth: job loss, medical bills, natural disasters, and the state of the economy in general are the real reasons why people file for bankruptcy.
Imagine this scenario: Mr. and Mrs. Smith are a married couple with two children. Both work and make decent income. Their credit is healthy, have one mortgage and there is equity in their home. Recently, Mr. and Mrs. Smith decide to remodel their outdated kitchen and build a garage for their two vehicles. They take out a home equity line of credit and start working on their project. Since they have some money left over after the remodel, Mr. and Mrs. Smith plan on taking a long-overdue vacation with their kids. Unfortunately, tragedy hits. Mrs. Smith is diagnosed with breast cancer and has to stop working for several months. Mr. Smith’s company downsizes due to the weak economy and he is laid off. As a result, the Smith family’s health coverage ends. The Smiths continue to live off of their life savings but they quickly run out and start to use their credit cards to pay for basic necessities. Before long, the Smiths max out their credit cards and have a hard time making the minimum payment. The medical bills are piling up. The value of their house plummets. The financial stress is taking a toll on the whole family; Mr. Smith struggles to sleep and shows signs of depression. The Smith family needs help and this is where bankruptcy comes in.
Thousands of families and individuals file for bankruptcy every year because they need financial and emotional relief, just like the Smith family described above. They file not because of financial mismanagement, but because events beyond their control have caused them to end up in a financial hole.
What kind of relief does bankruptcy afford to individuals? Next week’s article will describe the difference between filing a petition for relief under Chapter 7 and Chapter 13 of the Bankruptcy Code.
For bankruptcy matters, please call attorney Artur Zadrozny at (312) 375-1704.