Is Filing for Bankruptcy Common?
Anyone who considers filing for bankruptcy will likely have many questions about the benefits and drawbacks of bankruptcy and whether filing for bankruptcy is the right decision for them. They may also wonder how common bankruptcy is, thinking that filing for bankruptcy is a sign of personal failure.
However, many personal bankruptcies are triggered by events outside of the person’s control, especially medical issues and macro-economic issues. Bankruptcy should be viewed as a serious but powerful tool for an individual with no other less-severe options to take control of their finances.
If you are facing problems managing your debts and finances, contact the North Carolina bankruptcy attorneys of Sasser Law Firm today. You can schedule a free consultation with us to discuss the details of your situation and to learn more about your options for resolving your financial difficulties and debts.
How Common Is Bankruptcy?
Over the past few decades, bankruptcy has become an increasingly common process for Americans. Bankruptcy filings reached an all-time high in 2005, with more than 2 million filings. In other words, one out of every 55 households in the U.S. started a bankruptcy filing that year.
Individuals file the vast majority of bankruptcies. Businesses now account for only 3 percent of bankruptcy filings each year.
A commonly cited reason for bankruptcies was related to medical conditions (serious injury or illness, medical expenses not covered by insurance, and lost time from work due to injury or illness). Other common reasons for bankruptcy filings include reduced income and job loss, credit card debt, other unexpected major expenses, and marital problems.
Bankruptcy Statistics 2020-2021
According to the U.S. Courts system, the number of bankruptcy filings over the 12-month period ending September 30, 2021, was 434,540 filings. Of these filings, 16,140 filings were made by businesses, while non-businesses made the other 418,400 filings.
During this period, 310,597 filings were made under Chapter 7, while 117,784 filings were Chapter 13 bankruptcy. Chapter 11 bankruptcies accounted for 5,622 filings, while Chapter 12 bankruptcies had 344 filings.
Will I Lose Everything If I File Bankruptcy?
Some people fear that bankruptcy means giving up everything they own, including their bank accounts, houses, and vehicles. In reality, most debtors get to keep many or all of their possessions. If you file for Chapter 13 bankruptcy, you’ll be allowed to keep all your assets, although the value of your assets will factor into your repayment plan.
If you file for Chapter 7 bankruptcy, also known as liquidation bankruptcy, you can retain exempt and abandoned assets. Certain assets or specific dollar amounts in the value of assets are exempted from being seized or sold off in bankruptcy. Exemptions vary from state to state.
Ordinary personal possessions such as furniture, appliances, electronics, and clothing are rarely liquidated. Because of available exemptions, it is not common for people filing under Chapter 7 to lose their home or vehicle. However, the debtor should be clear about any risk prior to filing. If a Chapter 7 trustee seeks to liquidate an asset unexpectedly, a person seeking Chapter 7 bankruptcy can request to convert to a reorganization chapter like 13 or 11.
Is It Better to File for Bankruptcy or Just Not Pay?
Bankruptcy can be one of the most serious financial decisions a person can make. However, depending on the circumstances of your situation, bankruptcy could be the best option for you. Even though bankruptcy may impose a serious hit to your credit in the short term, most people’s credit scores soon begin to rebound.
Perhaps the best benefit of bankruptcy is resolving the stress caused by crushing debts and unpaid bills, allowing you to move forward with your life.
Nevertheless, bankruptcy is a serious measure for anyone to undertake. If you are considering filing for bankruptcy, you should first consult with an attorney to determine if other options might be better suited for your situation. Numerous options are available for people having trouble managing debts, including credit counseling, debt consolidation, and debt settlement.
Proactively working to resolve your debts is generally a better choice than simply ignoring or not paying them. However, taking no action at all is an appropriate option for some individuals.
When You Should or Should Not Consider Bankruptcy
As a general rule, you may wish to consider filing for bankruptcy if your total consumer debts (credit card debts, cash advances, payday loans, unpaid medical bills, etc.) exceed 50 percent of your annual income, and you foresee no path that you can follow to pay off those debts within the next five years.
However, even though bankruptcy can give you a fresh financial start, the effects of filing for bankruptcy will continue to linger for as many as 10 years. It will affect your ability to access credit or other financial instruments, obtain housing, seek education, or even find a job.
Non-bankruptcy options are also worth considering.
A debt management plan can help you develop a plan to pay off your debts using your current financial means. You may also be eligible for debt consolidation, in which all of your credit accounts are paid off such that your balances are consolidated into one amount that you make regular payments on. You may end up paying a lower interest rate, meaning you spend less money to pay off your debts.
Taking no action at all may be worth considering. The benefit of this approach will depend on various factors, including what remedies are available to a creditor upon default.
Finally, debt settlement may allow a debtor to pay less than the full balance owed. Debt settlement is not an entirely predictable process. There are significant credit reporting implications and tax consequences associated.
There are many companies that a debtor can hire to assist in the settlement process, but it is unclear what value these companies add since the debtor can negotiate these directly.
Common Causes for Bankruptcy
Medical-related expenses and time off work due to health problems are common causes or contributors to bankruptcy filings.
Other bankruptcy causes include loss of income, separation and divorce, and business reversals. As these are all unexpected changes to one’s finances, you may find yourself considering if bankruptcy is the right choice for you.
Talk To a Knowledgeable Bankruptcy Attorney in North Carolina Today
Don’t continue living under the strain of crushing debts or an unmanageable financial situation. At Sasser Law Firm, we have extensive experience helping thousands of individuals and businesses file for bankruptcy and take control of their financial future. We have the resources you need to pursue the best possible outcome in your case, including having three board-certified bankruptcy lawyers.
At our firm, you work directly with our attorneys. You will never be passed off to deal solely with a paralegal. We put no pressure on you to file for bankruptcy. Instead, we attempt to identify the best solution for your particular case. We offer straightforward, easy-to-understand fee arrangements that work with your difficult financial situation.
Call Sasser Law Firm today to set up a no-obligation consultation with one of our North Carolina bankruptcy lawyers to learn more about whether filing for bankruptcy might be the best option to help you take control of your financial future.
This post was originally published in April 2020 and has been updated for accuracy and comprehensiveness in January 2022.
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For more than 20 years, the Sasser Law Firm has been helping individuals and business owners sort through financial hardships to see the light at the end of the tunnel. Our North Carolina bankruptcy attorneys are all board-certified specialists, which means we have passed a complex exam, undergone a thorough peer review, and continue to earn legal education credits in this ever-evolving area of law.
