Bankruptcy often carries a stigma, with the unstated implication being that someone who files for bankruptcy protection has done so because of his or her profligate spending habits. This does happen, as people find their spending out of control due to overuse of credit cards. But more often, other problems trigger a bankruptcy. Medical problems, especially when if combined to a job loss, can quickly swamp most people's finances. Another significant cause of bankruptcy is divorce.
Could you get by on $16,000 per month? This is only somewhat lower than the per capita income in Kentucky for 2012, at $22,300. Well, if you are the comedian Sinbad, you can't. You see, he is $10,992,715 in debt, and $16,000 a month is simply not enough to service his debt payments. So, he has filed a Chapter 13 bankruptcy, to attempt to reorganize his finances.
A frequent topic of discussion in relation to mortgage problems and bankruptcy is how bankruptcy may help you obtain a mortgage modification. Because mortgages are not subject to a "cram down," meaning the loan would be reduced to the current value of the underlying property, you have to be able to afford your current mortgage payments for a bankruptcy to be helpful.
When people think of the reasons a person has to file bankruptcy, many probably think of profligate spending with a credit card as a primary cause. While credit cards can contribute to the creation of overwhelming debt, a more frequent cause is the financial disaster that accompanies severe medical problems. In a very short time, medical expenses and bills can swamp the average person's ability to pay, leaving no way out but bankruptcy.