Go ahead, ask someone on the street, or one of your friends, or even one of your enemies, “Why do you think most people file for bankruptcy?”
You will almost always get the same answer: “Because they don’t know how to control their money.” If only it was that clean and simple.
The fact is there are dozens of reasons why people file for bankruptcy. And while overspending is one of those reasons, most of the problems that have befallen my clients are much more complex and much more sympathetic than “overspending”. There are lots of statistics out there that purport to show the exact percentage of those people who file bankruptcy for this reason or that reason, but with over three decades of doing this type of work, here are mine:
1. Loss of income
This could be a layoff, a firing, a reduction of hours, a reduction of the hourly rate, or a medical problem that leads to any of the above.
2. Medical problems
Unexpected diseases or illnesses, leg or back problems, broken or hurt limbs, medically debilitating mental illnesses, and age. Some of these lead to Social Security Disability, and nobody is getting rich on that kind of income.
3. Separation or divorce
It is much more difficult to survive on one income than two in most cases.
Yes, of course, but it is not always that simple. Classical overspending is certainly responsible for a respectable number of bankruptcy cases. Some people just cannot control their spending. But sometimes the overspending is related to the reasons above, such as when a person loses hours and no longer makes sufficient money to pay on both his or her fixed monthly expenses, like housing, food, transportation, and the like, plus also money to pay on the old charges, or student loans, or personal loans. Or the client was living with a spouse; there was enough when both of their incomes were combined, but now they are living in two separate locations with two housing expenses, and the like. So when you hear “overspending”, before you judge, listen as to why the overspending occurred.
5. Death of a spouse
Like separation and divorce, this often leads to a substantial reduction of income, so often leaving the surviving spouse unable to handle the remaining bills.
6. Business failure
This could be our client’s business, or someone else’s business that they were dependent upon.
7. Those darned kids
I wish I had a nickel. . . Look, I get it, I have three kids of my own. Kids need things, like love, and clothes, and food. That is not where my clients get into trouble. They get into trouble when they co-sign for cars, and for student loans, and for businesses, and for this, and for that. And my clients are somehow surprised when their kids cannot pay the bills and leave it all for their parents. And then don’t call. Or write. Or pay. So if you think I am trying to tell you something, well, I am.
I think I need to file for bankruptcy. Now what?
As I said at the beginning, there are dozens of reasons why people have to file for bankruptcy, and everyone has their own story to tell. We want to hear yours at Steidl and Steinberg. Sure, you may not be able to pay your bills as they become due, but that does not mean that you are destined to a life of unrelenting phone calls, nasty letters, and lawsuits. Call or email us today. We want to help.