Why People File for Bankruptcy in Illinois

Keeping up with bills can be overwhelming, especially if you are months behind or facing large, unexpected expenses. While extensions may be limited, filing for bankruptcy is an option that can provide relief and a fresh start.

Before making a decision, it’s important to consult an experienced Illinois bankruptcy attorney to ensure filing is the right choice for your situation. Understanding the common causes and how bankruptcy works can help you make informed decisions and protect your assets.

Quick Answer: Income Cuts, Mortgage Debt, and Medical Fees are the main reasons why people face bankruptcy.

Most Common Causes of Bankruptcy in Illinois

1. Medical Debt

Rising healthcare costs are a leading cause of bankruptcy. A Harvard study found that 62% of bankruptcies are linked to medical expenses. Unexpected procedures, high deductibles, and uncovered treatments can quickly overwhelm savings.

2. Loss of Income

Unemployment or reduced work hours affects financial stability. Around 22% of bankruptcies result from income loss. People often rely on credit cards for temporary relief, which can worsen debt over time.

3. Credit Card Debt, Mortgage, and Other Debts

Uncontrolled credit card spending, mortgage obligations, or other loans can create unmanageable debt. Many borrowers struggle due to high interest rates, insufficient budgeting, or insufficient legal guidance.

4. Legal Fees

Divorce settlements, child support, or alimony obligations can add to financial strain. Some legal fees may be discharged through bankruptcy, while others cannot, but filing still provides an opportunity to manage finances more effectively.

5. Natural Disasters

Tornadoes, fires, floods, or other disasters can lead to bankruptcy if insurance does not fully cover damages. Filing can help stabilize your finances during unexpected crises.

Less Common Causes of Bankruptcy

You may be surprised that these reasons even constitute bankruptcy. But while they are rare, they still happen, and it’s important to be aware of them.

1. Foreclosure

Many Americans love their home so much that they file for bankruptcy to prevent foreclosure. In the process, they can also alleviate some of their other debts so they can catch up on their mortgage payments. So in many cases, filing for bankruptcy to alleviate multiple accounts of debt can be the best option.

2. Lack of a Structured Financial Plan

While the number of Americans who file for this reason is low, it includes those who have set no budget or boundaries for themselves. In these cases, uncontrollable spending will quickly send people into financial distress.

3. Utility Bills

You might be surprised, but utility bills account for 1 percent of all bankruptcy cases, including electricity, gas, trash, and water. For bills so inexpensive, some people do not consider these a priority, thus, letting them pile up while they pay the minimum charge to keep everything running. For some, filing for bankruptcy can provide them with a “fresh start” to catch up on their living expenses.

4. Student Loans

With college tuition already sky high, it may seem shocking that only 1 percent of Americans file for bankruptcy. But the reason for this is that student loans cannot be discharged through bankruptcy (or else everyone would be doing it). On the other hand, a few people do so to eliminate or restructure other debts so they can catch up on their student loan payments.

5. Car Repossession

The last reason for bankruptcy includes the reason to avoid car repossession. With as many as 3 missed payments, the creditor can easily take the car away. But as soon as you file for bankruptcy, they must return your car as well as any other property that was taken.

6. Divorce

When a couple splits up, it’s not just emotions that suffer—finances can take a hit too. One big reason is that during a divorce, debts and assets get divided. Sometimes, one partner ends up with way more debt than they can handle alone.

7. Overspending

With prices going up, managing money is trickier than ever. It’s not just about knowing inflation’s effects; it’s about budgeting smart and being careful with spending. Sadly, many people struggle because they don’t budget well and spend too much. This leads to debt piling up and financial stress getting worse.

Life After Bankruptcy

Filing for bankruptcy can feel like a failure at first, but afterwards, it can be such a relief to get rid of all that debt. Simply working with a bankruptcy attorney cannot only lead you to a “fresh start” long term, but also provide immediate relief like preventing foreclosure and repossession.

After all, you need a place to stay and means of transportation to work and pay for these expenses. So if you are worried that you might lose these things in the near future, filing for bankruptcy can stop this process, even allowing you to keep more than you think.

How a Bankruptcy Attorney Can Help

An Illinois bankruptcy attorney provides:

• Guidance on filing for Chapter 7 or Chapter 13
• Assistance with forms, deadlines, and legal compliance
• Protection of assets and property rights
• Advice on avoiding common pitfalls and maximizing relief

Consulting an attorney early ensures you understand your rights and options, prevents mistakes, and increases your chances of a favorable outcome.

Contact Barber Law Offices LLC

If you live near the Chicago, IL area, contact the attorneys at Barber Law Offices, LLC. Our attorneys are not only experienced but also stay updated on all current laws. They have also worked in several diverse cases, you can feel comfortable as they guide you to make the best financial decision. When working with our attorneys, they will answer all of your questions, provide legal advice that is tailored to your unique situation, help fill out all documents, and provide deadline reminders.

To speak with an experienced attorney at Barber Law Offices, LLC., contact us directly at 847-303-9780 or fill out a contact form. We will be in touch with you shortly!

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Frequently Asked Questions (FAQs)

What are the main causes of bankruptcy in the U.S.?

Medical debt, loss of income, credit card debt, mortgage obligations, and legal fees are the most common causes.

Can bankruptcy stop foreclosure or car repossession?

Yes. Filing for bankruptcy can temporarily halt foreclosure and repossession, allowing you time to reorganize debts under Illinois law.

What debts can bankruptcy discharge in Illinois?

Most credit card debt, medical bills, and unsecured loans may be discharged. Certain debts, like most student loans, child support, and some taxes, are usually not dischargeable.

Do I need a bankruptcy attorney?

While not required, an attorney ensures forms are filed correctly, deadlines are met, and Illinois laws are followed, which increases your chances of a favorable outcome.

How does filing for bankruptcy affect my credit?

Bankruptcy impacts credit but provides relief from unmanageable debt. With proper guidance, you can rebuild your credit over time.

What is the difference between Chapter 7 and Chapter 13 bankruptcy in Illinois?

Chapter 7 clears most debts quickly, while Chapter 13 creates a repayment plan. An attorney can determine the best option for your financial situation.