Reasons to Consider Bankruptcy 

Many people find themselves in situations where bankruptcy is the only solution. However, the decision to file is not one that should be made lightly. 

Bankruptcy has severe repercussions for your credit score, and should only be considered when other options are not available. Here are five reasons to consider bankruptcy: 1. Unmanageable Debt. Keep in mind that you should seek a Harrisburg, PA bankruptcy attorney for more accurate information if you are considering bankruptcy. 

  1. Unmanageable Debt 

One of the most common reasons people file for bankruptcy is that their debt has become unmanageable. This could be a result of circumstances that are out of their control like losing a job or an unaffordable mortgage or due to poor personal financial decisions such as overspending on credit cards. 

Natural disasters can also cause huge losses of property and assets that cannot be recouped through insurance or emergency savings. In addition to these losses, there are costs like rebuilding and repairing damage that can put people in a financial hole. 

Other causes of unmanageable debt include medical bills, which account for 62% of all bankruptcies, and unaffordable mortgages or spending beyond one’s means. While some debts, like student loans and court-ordered fines or alimony and child support payments, are non-dischargeable in bankruptcy, most forms of unsecured consumer debt can be wiped out. 

  1. Unaffordable Utilities 

Many people get behind on their utility payments due to a variety of circumstances. The bills can seem overwhelming, especially as other debts accumulate and life expenses rise. The utilities often offer payment programs, but some customers cannot afford them. 

Defaults on utility bills can lead to the disconnection of essential services, such as water or electricity. This creates a dangerous situation for the health and safety of families. Medically vulnerable individuals, such as infants and the elderly, are at risk for dehydration and exposure to communicable diseases without access to clean drinking water. 

A bankruptcy filing stops a utility termination and will allow you to keep your service, typically by providing a deposit of three times the average monthly bill. This allows you to focus on catching up on your utility bills while also protecting your house, car and other assets. 

  1. Foreclosure 

The foreclosure process is stressful for borrowers and lenders alike. Banks do not want to foreclose on homes, but if you miss a mortgage payment, it can happen. While foreclosure will damage your credit score, there are ways to avoid this option and work with your lender to come up with an alternative plan that will satisfy both


One option is a deed in lieu, where the borrower gives back ownership of the property to their lender. The lender may then sell the home at a public auction and use the proceeds to cover their loss on the loan. This can help you avoid the stigma of a public eviction, but it also makes future home ownership more difficult. You can also use bankruptcy to stop a foreclosure, car repossession or other debt collection actions. 

  1. Illness or Injury 

Medical bills are the most common reason people consider bankruptcy. Serious illness or injury can cause bills to skyrocket and even those with health insurance may find themselves overwhelmed. This type of debt can eat away at savings, emergency funds or other assets leaving very little disposable income to pay creditors. 

The good news is that if you qualify for Chapter 7 bankruptcy medical debt can be wiped out and discharged. This is often the best option for those who have very limited assets as it allows them to keep their personal property and stop wage garnishment, collection agency calls, and legal action from creditors. It can also help you get on a better footing with your credit score after the process is complete. 

  1. Poor Personal Finance Choices 

Bankruptcy is a powerful tool for people who need to start over. It stops collection calls, prevents foreclosure, repossession and wage garnishment and erases debt. It does hurt credit scores, but less severely than the alternatives – and the scores rebound much faster than you might think. 

Medical expenses, student loan debt, job loss and divorce are major causes of bankruptcy. Sometimes, two or three of these factors team up to light a financial firestorm. 

If you have secured debts, like a mortgage or car loan, you can typically keep those properties, as long as you continue making payments on them (unless you agree to “reaffirm” the debt and sign back up). You may also be able to protect equity in your home and personal property up to a dollar limit.

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