In my bankruptcy practice, I interview 10 to 25 potential clients each week, so I’m on the front lines of this battle. My interviews last from 30 minutes to 2 hours. I hear the stories and details of their lives, and more often than not the clients tell me that they have tried everything else before seeking my advice.

Bankruptcy is not a decision people enter into easily; nor does everyone who walks into my office end up filing bankruptcy, but there several common themes to each case I see in my bankruptcy practice.

I commonly refer to these causes and circumstances as “Triggers, Traps and Tragedies”. These are permanent or temporary situations people find themselves in that ultimately caused them to file or consider bankruptcy. In today’s economic climate many people can point to being in more than one category at the same time: Loss of a job and health crisis.

Divorce (trigger & tragedy)

The break up of a family is both a tragedy and trigger to bankruptcy. Often times it results in two bankruptcies (husband and wife). It is easy to see why. A divorce or separation creates two new households each with mandatory expenses (mortgage/rent, utilities, food, insurance) whereas before it was just one set of fixed expenses. The extra money for the additional household just does not appear out of thin air. If the divorce is contentious and/or child custody becomes an issue the cost (financial and emotional) is enormous.

Death (tragedy)

The loss of a loved one can cause so many financial repercussions there variations are more than I can list here. Sometimes, the families’ main breadwinner gets sick and dies, or a young child tragically gets sick (disrupting normal work and household routines) combined with a lack of insurance. The list is endless.

Health Crisis (tragedy)

Similar to loss of a loved one is enduring a major or even a moderate health crisis. If the client did not have sufficient medical insurance or their income was disrupted for a long period of time because of illness than financial distress is inevitable.

Another common occurrence is the cruel reality that the health crisis has now left an on-going obligation in the form of need for constant medical care or if the health situation involves one of the families’ income earners that left him or her earning less (sometime a lot less money) or no employment prospects.

I have a great respect for the medical profession – we have one of the best medical systems in the world (I’ve been extremely lucky I have received the best), but there is an ABSOLUTE disconnect between the service of providing medical care and their billing departments.

It used to be that when a patient was billed, the doctor was one of the persons (along with the billing department) involved in preparing the medical bill. Somewhere in the last 20 years doctors have abandoned their patients when it comes to billing for THEIR services. If asked how much a procedure or visit costs, most doctors will give you a blank stare and mumble something about “you should ask billing.”

My personal opinion is that doctors, as much as they complain about insurance companies, have willingly abdicated their responsibilities to their staff or third party medical billing companies. They, as it appears to me, are more concerned with “production” (i.e. the number patients seen or procedures performed) then they are with patient care (which includes explaining the medical bill for the services they themselves rendered). That in my opinion (one cause) is why there is so much confusion, over billing and anger at the current health care system. The service providers (doctors) don’t have a clue as to what is billed in their name.

Loss of Job (trigger)

This is obvious and devastating especially where the former employee had worked for a company or in an industry for years. The financial and emotional repercussions are enormous. Even if the income is replaced the emotional wounds surrounding a loss of a career can be devastating. When that income can’t immediately be replaced (and the unemployment benefits run out) any 401k money often gets raided (causing taxes, penalties and interest – further exacerbating the bad situation) and than credit card usage skyrockets to “get by” until another job is found.

Loss of Income (trigger)

Not as bad as a total loss of a job, but no less financially devastating since it starts a slow depletion of savings, retirement accounts and increased credit card use. This is a very common occurrence in today’s economic climate. Loss of income is common can occur with the loss of overtime, cut in pay or hours. The costs of commute, lunches and child care remain the same.

Living Beyond Means (traps)

This often goes hand in hand with loss of income. The bad financial decisions made a couple of years before when the overtime or commissions could cover expensive car payments or credit card minimum payments now become self evident. This cause can’t and should not be sugar coated. You made bad choices: expecting the high commissions or overtime to continue indefinitely and now the economy has turned downward and that income has disappeared.

Increase In Mortgage Payments (traps)

This is another common cause that I see almost every day. A first time home buyer bought a home they could not afford, but since the initial loan payment (teaser rate) was within their monthly budget they bought the house anyway. Now, the payment has doubled (according to the terms of the loan), they now can’t afford the payment. This situation is often combined with other categories (especially loss of income) to create financial distress. And if the home was purchased within the last 4 or 5 years, the homeowner often (read: almost always) find themselves in a negative equity situation.

Lack of Financial Education (traps)

We do not teach financial education in school. It should be a mandatory subject. The importance of learning the basics about borrowing money, savings and retirement are so critical in today (and yesterday’s) world. Where do we get our financial education? Usually we learn it from our parents, but a huge influence is the media culture that we live in today.

This post is not about assigning blame or bemoaning uncontrollable factors like politics, terrorism, or the current state of the economy. But at some point we either take responsibility for our situation, learn from our mistakes and educate ourselves on the proper ways to handle money and debt or we can remain “victims.”

Victim hood has become a national pastime – it seems every one is a victim of someone else’s bad behavior or beliefs, but when it comes to your financial life there are no real victims, just lack of good financial education or the failure to follow sound advice.

Regardless, we deal with the facts as we find them now. The debts are either yours or they are not. Some people who I have helped file bankruptcy were victims of identity theft and decided that bankruptcy was part of the overall strategy to “fix” that problem. I say “fix” because identity is on the rise and there really is no easy fix – and an entire series of books can be written on that subject alone.

Although this is a big decision, get good advice from me or another bankruptcy attorney before you live another day in financial prison.

Disclaimer

Fresno-Bankruptcy-Lawfirm.com is owned by the Law Offices of Jeffery D. Rowe. We are a debt relief agency. We help people file for bankruptcy relief under the Federal  Bankruptcy Code (Title 11 of the United States Code). If you would like to discuss your situation in further detail, please call our offices at: (559) 228-1500 to schedule a consultation.