Debt is something everyone lives with in some way, shape or form. Much of the debt load a person has is based upon a specific level of income. When that income stops or debt load becomes too high, payments may fall behind and the debtor is forced to try and regain some financial foothold on life through bankruptcy. Other reasons often include student loan debt and medical debt.
Life is all about balancing income and expenses. While many people have a firm hold on their bills, emergency expenses, loss of a job or medical bills can quickly force finances out of balance. Secured debt, like cars and homes, are the hardest hit because lenders do not care about why the bills are not being paid, just that their property is sitting out there worthless to them unless those bills ARE paid. With foreclosures and repossessions on the horizon, a bankruptcy claim may be the saving grace of a person or family.
Taking a look inside the life of financial turmoil can better explain why people choose to make a bankruptcy claim. Imagine the phones ringing off the hook day and night with creditors wanting the money they are owed. Many of these creditors will work for companies providing unsecured credit which means they will talk hard and fast trying to reclaim their money. No physical property is attached to unsecured debt, so no matter how many times you tell them you cannot pay the bill, they will continue to call hour after hour.
Once bills have gone unpaid for an extended length of time, creditors have the right to file legal cases for payment against the debtor. Or, they can choose to sell the debt to a collector that works every day recovering money. If the debt is part of a court case, the debtor risks losing property and income. This is not to mention other legal ramifications like the loss of a job if security clearance is required. Car insurance, phone, cable, gas and electric companies all check credit ratings before allowing new utilities or insurance to be set up.
Now, the debtor is receiving calls 24 hours a day, they cannot work and they have no utilities in their home because of bad credit scores.
Filing a bankruptcy claim is often a last resort for the debtor. Life unbalanced by debt and financial obligation is life in turmoil. Bankruptcy can protect secured debt property and remove the weight of creditors calling all the time. Whether debt is liquidated through Chapter 7 or restructured with Chapter 13, there is some relief from the financial hole the debtor has been living in for so long.