There are different kind of bankruptcies for different kinds of people and institutions. Chapters 7, 9, 12 and 13 bankruptcies exist, depending on who or what you are and what kind of bankruptcy you are declaring (full, partial, personal, corporate, farming etc).
Filing bankruptcy is a big thing. It's not just telling financial institutions that you cannot pay your bills - it is a permanent negative financial record. Even if it's removed from your credit report after ten years, you may still be obliged to report a bankruptcy for the rest of your life – on application forms for employment, housing, credit card applications or opening bank accounts.
Bankruptcy can be as a result from many things. Careless spending, lack of saving, overspending and irresponsibility are a cause that many of us have to admit. Worse, people have been known to go on vacation or splurge on expensive shopping trips, knowing they were going to file bankruptcy and not have to pay anything back – a practice than is highly illegal. They should pay a heavy price because this kind of illegal activity hurts us all - in the form of higher interest, increased fees and less credit allowed.
But not everyone who files for bankruptcy does so because they fancied a cruise they couldn’t afford, or shopped at Bloomingdales every weekend.
The fact is that the main cause of bankruptcy in the United States is due to enormous debts caused by medical bills – something a person is not to blame for, or deserves. A car accident to a family with little or no medical insurance can cause them to lose their jobs, their homes and ruin their credit.
Half of all bankruptcies are caused by medical bills. This was found true in a Harvard study in 2005 and is still the case – or getting worse. In fact, with employers offering less and less coverage and with deductibles and premiums being raised, some two million people are affected by medical bankruptcy every year. Most of these people are middle class and home owners .What is so disconcerting is that over 75% of these people had health insurance at the beginning of their illness or at the time of their accident, but lost their jobs due to their illness or lost their health insurance during their illness which in turn caused them to lose everything.
You can read more on this study here:
Bankruptcy causes a huge stigma, both financially and socially for so many people. So before we regard someone as being careless, irresponsible or consumed with needing ‘stuff’, we, as employers, landlords, friends and neighbors, need to first take the time to understand how and why someone ended up bankrupt. Odds are at least 50% that it was through a terrible illness or accident that they had no control over. And everybody deserves a second chance – especially when their first chance was taken so unfairly.
Have you or someone you know had to declare medical bankruptcy? Is there a story you’d like to tell us?
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