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Why people file for bankruptcy

The rate at which Massachusetts residents and others are filing for bankruptcy is dropping. However, there were still 772,594 bankruptcy filings during a 12-month period that ended in June 2017. One of the main reasons why people file for bankruptcy is because they lost their job. Typically, an individual didn't have enough money to cover his or her mortgage, car payment and other expenses. Ideally, a person will have an emergency fund that can last for up to 12 months.

Even if someone doesn't lose his or her job, a reduction in hours or salary could still make it difficult to make ends meet without an emergency fund. Dealing with medical bills can lead to bankruptcy for a couple of different reasons. First, it may be necessary to put those expenses on a credit card. Second, an individual may choose to make medical payments as opposed to staying current on a mortgage or other debt.

That may lead a person to file to stop a foreclosure even if it was related to mounting medical bills. Individuals who get divorced may be at a higher risk of filing for bankruptcy. This may be due to the cost of legal counsel as well as having to split assets with a spouse as part of the divorce settlement.

Individuals who are struggling to pay their debts may benefit by filing for bankruptcy. Doing so may allow a person to put an end to creditor contact and renegotiate the terms of a secured home or auto loan. It may also be possible for an individual to have unsecured debt balances discharged. In some cases, they may be discharged immediately or at the end of a Chapter 13 repayment period. An attorney may talk more about who qualifies for protection from creditors.

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