Why Do People File for Bankruptcy?

Bankruptcy is one way of dissolving personal debt. Although it requires the person admitting they cannot control their finances at that time, it is a rigorous process that can be completed through the US legal system. Debts can be forgiven and those filing for bankruptcy can have the opportunity to start over. There are a number of reasons people find it necessary to file bankruptcy in New York.

Income Tax
When people amass wealth, they often find themselves in trouble with the Internal Revenue Service (IRS), as well as state and local tax assessment offices. The reason is simple. There are many different tax laws that require people to pay income tax. Sometimes these taxes are not accounted for by the individual when planning a budget. When taxes are not filed promptly, penalties and fines accrue. The government may be slow in discovering the missing tax filings, but once they are aware, the debts must be paid immediately to avoid further problems, such as liens and wage garnishments.

Property Tax
Another tax avenue that can get someone into trouble is property tax. When someone has a large amount of discretionary income, they may forget to set aside money owed for personal property tax on items such as real estate, vehicles and watercraft. The state and local municipalities will not forget, however, and expect to be paid. Not satisfying debts owed will likely result in liens and garnishments as well. A New York best bankruptcy attorney may be able to settle the issues between the debtor and the tax office to reduce the amount of money owed.

Unemployment
In an unstable economy, people are more likely to lose their jobs and be unable to find suitable employment. It is difficult to find a job that pays equal to or more than the one that was lost. Even when an employee may suspect a possible lay-off in their future, finding new employment can be difficult at best. Unemployment only pays a certain percentage of the previous wage. It is also limited in time. Anyone unprepared with a sizable nest egg or without the means to find immediate employment on a temporary or permanent basis will likely have difficulty paying all of their bills. This is especially true for those living paycheck to paycheck before being fired or experiencing a lay-off.

Divorce
One advantage to married life is splitting the bills. Resources can be pooled to cover rent or mortgage, utilities, food and other household expenses. Being separated and/or divorced causes many people to change their lifestyle. New living situations may dictate a higher rent payment, longer commute and increased spending on utilities and food. Legal and court fees can boost the expenses as well. It may be impossible to keep up the old lifestyle with the new budgetary restraints, and may drive people to filing bankruptcy.