Every situation is different, and each bankruptcy case is unique in the circumstances that precipitated its filing. This is one of the things that makes bankruptcy a complex area of law, as each individual has a different situation that must be addressed in their bankruptcy petition. At the same time, however, there are several common causes leading to bankruptcy that seem to encompass most cases.
The first of these is credit card debt, and as an extension of that, lawsuits or garnishments. Unsecured credit card debt is a leading cause of bankruptcy, especially when that debt has been sued upon or had a garnishment executed on it. With a wage garnishment, a creditor has actually secured a court order against you to take money out of your paycheck to pay back the debt. The only way to stop that is to file your bankruptcy case as soon as possible.
Another common cause of bankruptcy is medical bills. These are considered unsecured debts and can be included on your bankruptcy petition. Often, if a person suffers and endures medical hardship, the medical bills will begin to pile up to the point where it is difficult to overcome them. If that is the case, a Chapter 7 bankruptcy may be the answer.
Of course, overspending by an individual person can also lead to bankruptcy. An overextension of spending can quickly lead to a mountain of credit card debt, and potentially then include high-interest loans (such as payday loans) as that person attempts to get out from under that debt. A Chapter 7 bankruptcy can address all of these issues as well.
Finally, there can also be car repossessions, driver's license suspensions from unpaid tickets, and foreclosures. These debts, because they are either secured or owed to a governmental unit, usually need to be paid back and thus a Chapter 13 bankruptcy is appropriate here. In the event that you want to surrender your house or car, the deficiency balance can be discharged in a Chapter 7 bankruptcy.
