Whether you are in neck-deep in debt, or you have recently been laid off, filing for bankruptcy might be, in certain situations, the best option that you can have. It can help stop the creditors from repossessing your vehicle or completing the foreclosure of your home.

Although bankruptcy saves you from the above, it also deeply damages your credit score and hampers your credibility to seek loans/debts in the future.

If you are someone burdened with huge debt that seems impossible to pay off, you might want to file for bankruptcy.

But before you go on filing for bankruptcy, consider the difficulties you might face during bankruptcy proceedings.

You should consult a professional accountant before you declare bankruptcy.

Consulting a Professional Accountant

Accountants can be helpful both before and during bankruptcy proceedings and can play various roles/duties. The most important of all is to prepare the financial statements of the bankrupt company or the person.

However, hiring an accountant for the preparation of your financial statements can prove to be expensive, and you might not be in a position to pay for the services at the time of filing for bankruptcy.

Learning accounting skills or earning a professional degree in accounting can prove to be beneficial in such cases.

Although earning a professional degree such as CPA can be very difficult and stressful, taking online preparation course at Wiley CPA can help you clear the exams in the first-go. The online classes and flexible timings ensure that you can learn at your convenience without disrupting your work life.

Although filing for bankruptcy can be a tiresome task, many people wonder why people do so?

Here in this article, we shed light on some of the most common reasons for a bankruptcy filing.

 

1. Medical Expenses

One of the top reasons people file for bankruptcy is the pile of massive medical expenses that they have to pay. According to a report by the American Public Health Association, around 66% of all bankruptcies filed in the U.S. are related to unmanageable medical expenses.

Unexpected medical emergencies can happen anytime and to anyone but problems arise when medical insurance doesn’t cover cost of treatment.

Usually this happens when a particular disease is not covered by the insurance company or the cost of treatment is high.

In such cases, medical bills can quickly add up, sending you into massive debt.

2.Unemployment

Unemployment is also one of the top reasons for filing bankruptcy in the United States. Whether you lose your job because of company downsizing or due to a sudden disability, a layoff can put you under an immense amount of stress and depression.

For most people, a full-time job is their only source of income, and when they lose their job, it becomes quite difficult for them to make ends meet, especially when they don’t have an emergency fund in place.

In today’s world when unemployment rates are high, finding a new job can take months or even years. The only option to stop the creditors from going ahead with foreclosing your home or repossessing your vehicles when you get laid off is to file for bankruptcy.

3.Divorce

Divorce proceedings tend to be quite expensive and result in financial loss for one party or the other.

Married couples equally share the burden of paying off debt. But, when divorcing, the debt burden can fall on one of the spouses.

In several cases, one spouse has to pay money to the other in the form of alimony or child support which can put additional burden on that spouse.

To rid oneself of the additional burden, one can file for bankruptcy.

4.Overspending and Poor Financial Management

Contrary to popular belief, most bankruptcies are not a result of some extraordinary decisions or events. They’re a direct result of one’s overspending habits.

In the digital era that we live in, it is pretty easy to get a credit card. A credit card offers you the credit to spend without actually having earned it in the first place.

People who are not good at managing their finances often end up in credit card debt. These small credit card debts pile up to become substantial amounts and can cause the debtor to declare bankruptcy.

5.Student Loans

Student loans are yet another type of debt that can result in insolvency. College education has become very expensive these days and even students from good financial backgrounds can find themselves applying for student loans.

According to recent statistics, almost 42.9 million Americans are under federal student debt. These student debts can quickly become overwhelming and can cause students to declare bankruptcy.

Conclusion

There are many reasons why people might find declare bankruptcy. The most common reasons are unemployment, medical expenses, divorce, overspending, and student loans. A person might be forced to file for bankruptcy either because of one of these reasons or a combination of these reasons. No matter the reasons, one should analyze the situation and consult an experienced accountant. A professional accountant can not only provide valuable advice related to the matter but can also help in preparing financial statements related to bankruptcy.