According to U.S. bankruptcy court statistics, in an average year, more than 1.5 million people file for bankruptcy. Bankruptcy is a legal status issued when a person or company cannot pay its debt; this legal status is managed by the federal court system. There are various types of bankruptcy, defined in the U.S. bankruptcy code and identified by chapter. The most common types for individuals are Chapter 7, for liquidation of assets, and Chapter 13, for reorganization of payment. Individuals request this status by filing bankruptcy. However, there is a fee, and there is also a somewhat complex legal process to navigate. Having an attorney may be helpful.
Those who file for bankruptcy must pay a fee: $335 for a Chapter 7 case, and $310 for Chapter 13. In addition, hiring a bankruptcy lawyer can be costly. For instance, one might pay between $1,500 and $3,000 on an average Chapter 7 bankruptcy case. However, it may be well worth it. The success rate for Chapter 7 bankruptcy claims is 35% higher for those who use an attorney, and over 50% higher in Chapter 13 bankruptcy cases.
There are many causes that lead individuals to file for bankruptcy. According to a recent Harvard University study, medical expenses are a major cause of personal bankruptcy, accounting for over 60% of cases. Credit card debt and unpaid mortgages also lead to bankruptcy cases; most American families have multiple credit card bills, and the typical credit card purchase is 112% higher than if one simply paid with cash. Student loans, while the cause of only 1% of bankruptcies, still result in around 15,000 bankruptcies annually. No matter cause, 97% of all bankruptcy claims in the U.S. in 2014 were personal; the remaining 3% were business bankruptcy cases.
The business climate may have improved, but still, any businesses are forced to file a bankruptcy claim in order to satisfy creditors. Although lack of profitability is the main reason for bankruptcy, there are many underlying causes. Poor location, poor customer service, strong competition, and even criminal activity can all undermine a business.
Whether you must file a business or personal bankruptcy claim, consult an attorney so that you have guidance through the difficult process.