Causes of Bankruptcy

There are many causes that often lead to bankruptcy, and sometimes these causes are completely beyond the debtor’s control. While this list is by no means a complete list, this subsection discusses some of the more frequently seen causes of financial distress that ultimately lead to bankruptcy.

One of the most common causes is a loss of income or employment. Oftentimes this means the loss of a job entirely or a significant reduction in one’s hours at work. Sometimes it’s the reduction of the total household income that results from a spouse’s unemployment or reduction in hours. Perhaps a divorce has reduced your monthly income but left you with the same bills you were paying before the divorce. Whatever the cause may be, a significant reduction in household income can make paying all the bills difficult if not impossible.

Sometimes, the only source of income for someone is from the operation of their business. While running one’s own business can often lead to the flexibility and control that many entrepreneurs seek, the risk that runs with personally guaranteeing business debt can lead to overwhelming financial stress. Filing bankruptcy as an entrepreneur is a special situation, so please visit our Entrepreneurs Filing for Bankruptcy page for more information.

Another common cause of bankruptcy is medical bills. Nowadays, even co-pays for emergency or specialized care can amount to hundreds or even thousands of dollars, and for those who are uninsured, these necessary trips to the doctor can sometimes cost patients multiple thousands of dollars. The cost of medical treatment for a serious injury is often compounded by the loss of income (or sometimes employment altogether) while the person is out of work recovering from the injury.

If any of these reasons, or perhaps other reasons not discussed above, caused you to fall behind on your bills, you may have already started receiving collection efforts by creditors or their attorneys. Creditors have a few methods they use to collect on debts. Most frequently, if your account is past due, the creditor might send you harassing letters and phone calls regarding your account. If that doesn’t work, many creditors will file a lawsuit against you (often in small claims court) to collect the debt. If they receive a judgment in their favor, then they can either garnish your wages, or they can send it off to a collections agency. For more information about how creditors can collect on debts, please visit our Debt Collections by Creditors page.

If any of these situations have happened to you, or even if there’s another reason why you feel that you’re in financial distress, experienced Montgomery bankruptcy attorney Chuck Grainger can meet with you and help you determine if Grainger Hawley & Shinbaum, LLC can help you with your financial situation. At Grainger Hawley & Shinbaum, LLC, we strive to put our clients in the best possible situation for success. We serve clients in from our offices located in Montgomery, Prattville, and Troy, Alabama. You can call or text us at (334) 260-0500 or contact us online to schedule a free consultation with Mr. Grainger to see how we can help you get out of the hole.