What Causes the Need to File Bankruptcy?

bankruptcy-law-bookPeople often associate bankruptcy with a way to deal with the consequences of uncontrollable spending. However, as a Los Angeles bankruptcy attorney, we know reckless spending isn’t often the reason someone files for bankruptcy. There are some major events in life that can play a role. Many of these aren’t situations you can necessarily avoid.

Some of the top causes for people to file bankruptcy include:

Unexpected Medical Bills

You may be in a stable financial situation when a sudden illness or accident occurs. In a Harvard study, 62 percent of those filing for bankruptcy said medical debt led to their decision. One hospital stay or a prescription medication can leave you with a stack of bills. Your condition may also limit your ability to work.

In most such cases, the person has medical insurance. But their deductible may be so high or their condition isn’t covered, so bills come in they simply cannot afford to pay.

Loss of Employment

Unemployment can happen to anyone at any time. For whatever the reason, the loss of a job means a primary income stream is eliminated. You may find yourself drawing from your savings, or using a credit card, to pay rent and for daily necessities such as food. Finding a new job can lead to further expenses, such as seeking training or purchasing a new wardrobe. Losing your health insurance along with employment exacerbates the problem.


Divorce often triggers financial difficulties. Legal fees, a lost wage, monthly bills, mortgage payments, and even tuition or credit card debt can add to the hardship. When you factor in legal fees, child care payments, and alimony, the financial burden of divorce can easily lead to bankruptcy.

Warning Signs

You may need a Los Angeles or Orange County bankruptcy attorney to help if you’re:

  • Using a credit card to pay for groceries and gas.
  • Spending your paycheck on debt payments.
  • Using one card to pay another.
  • Missing payments, which increases interest rates.
  • Having wages garnished by lenders.
  • Working a second or third job to pay debt.

You may also consider bankruptcy if debt is causing stress that affects your job or relationship. Also, despite your efforts at managing debt, it still increases each month.

The Truth About Bankruptcy

Whether you file for Chapter 7 bankruptcy or Chapter 11 bankruptcy, there are some debts that won’t go away. Examples include student loans, child support, income taxes, and court judgements. You should not declare bankruptcy when you’re broke. It can cost $1,000 or more to start the process, and most attorneys don’t accept credit cards.

Nonetheless, our Los Angeles bankruptcy attorney can help you with an important step in handling debt caused by problems out of your control. Oaktree Law provides bankruptcy services throughout Los Angeles and Orange County, as well as throughout Southern California. If you’re ready to get back on your financial feet and use bankruptcy as a positive advantage, call our bankruptcy attorney today at 562-219-2979 to discuss your case.