The term "bankruptcy" is often emotionally charged and carries a heavy stigma of financial hardship. The decision to file for bankruptcy should not be taken lightly and does carry many long-term consequences that may affect a person's life for years to come. However, there are some situations in which filing for bankruptcy may be the most viable or beneficial solution. It can be difficult to know if bankruptcy is truly the right solution for a given financial situation, so it is important to understand the reasons that may prompt someone to file for bankruptcy and what this option can do to help those in dire need of financial help.

There are many scenarios that may land a person in debt or other financial crises that may be solved through filing for bankruptcy. Some may arise from a situation which simply got out of hand, unexpected bills, or a catastrophe of some kind. The most common reasons for filing bankruptcy include:

• Medical expenses - Almost 50% of bankruptcy filed in the U.S. is due to medical bills. With surgeries and long-term medical costs so high, it is easy to see how a serious injury or illness could lead to a person filing for bankruptcy.


• Divorce - When a household experiences the strain of a divorce, the split income providing for one house, alimonies, or attorney fees could cause financial crisis.


• Job loss - Especially in these uncertain economic times, unexpected unemployment happens far too often, and a long period of unemployment can lead a person to file for bankruptcy.


• Disasters - Natural disasters can cause catastrophic damage to a person's housing, automobiles, or even health. Especially for those without insurance, a flood, tornado, hurricane, or earthquake could render a person in need of filing for bankruptcy.


• Foreclosure - in the event of financial crisis, some homeowners elect to file for bankruptcy in order to keep their current home.

While filing for bankruptcy may seem like a last resort, it can also be beneficial to file before reaching a state of dire need. Both Chapter 7 and Chapter 13 bankruptcy require credit counseling and a complex process that can cause delays. Incorrectly filing paperwork or other setbacks can make the process of being approved quite lengthy. A bankruptcy attorney may be able to help with ensuring that all steps are completed properly, to avoid these types of delays.

However, certain situations should lead to a consideration of filing for bankruptcy. When a person's liabilities exceed their assets and creditors are unwilling to negotiate, a person may find themselves backed into a financial corner. This can create strain on personal relationships and may even jeopardize a person's health through high levels of stress. Bankruptcy exists as an option for these types of scenarios.

Of course, bankruptcy does carry heavy consequences, so it should not be relied on unless it is appropriate for the financial situation in question. This makes it important to know when to file for bankruptcy, as it may not always be the most beneficial option. For instance, is there is a way for a person to work out a payment deal with their creditors or if a high credit score is important to the person considering bankruptcy, it may not be the best option. Filing for bankruptcy will remain on a person's credit history for years, so it is important to fully weigh the pros and cons in every unique situation.