Causes Of Consumer Bankruptcy

Causes of consumer bankruptcy. Information on the cause of personal or consumer bankruptcy. Primarily our law firm asserts claims of consumers against collection agencies and others that violate consumer...

Primarily our law firm asserts claims of consumers against collection agencies and others that violate consumer protection laws that relate abusive or improper debt collection practices. So, with that in mind my answer would be somewhat limited by my exposure to the bankruptcy arena. But I think bankruptcy can be caused by a number of factors.

You may or may not be aware but congress has recently passed a law that significantly changes the bankruptcy law. I believe that's effective for filings on or after 10/17/05 and I'm going from memory. I am not a bankruptcy lawyer so that's a subject to someone verifying that. But a lot of people file bankruptcy because they lose their homes. They lose their jobs. Other people file bankruptcy because they go through divorce and perhaps not emotionally prepared to go through that and thus lose finances. There are a lot of reasons obviously when people file bankruptcy. I think, unfortunately, the perception much of the time is that people file bankruptcy because they don't want to pay their debts or they don't want to pay their bills. I run across a very small percentage of the population that I believe that's the case. I think most people out there really want to pay their debts. They're hard working but life happens and when life happens, sometimes people have no choice.

There is something interesting about divorce and a misconception that I find much of the time. Generally speaking and again all of what I'm saying is subject to verification for each person state that they are in. I'm in Texas so I'm speaking from that perspective. Generally in Texas if a divorce decree requires one of the spouses to pay certain debts or certain bills, that requirement does not change the relationship between the other spouse and the creditor. In other words the creditor can still go after both spouses, irrespective of what the divorce decree says. All that happens when the divorce decree requires one spouse to pay debts is that if the first spouse does not pay what they're supposed to, they can go back to the divorce court or the family law court and seek relief there. So, that can lead to bankruptcy because one spouse may not be expecting they have to pay the debts. The other spouse is supposed to pay under the decree and then that second spouse gets saddled with all of the debt. Again that's something that the second spouse did not choose to occur but nonetheless it happened and it could lead to bankruptcy.

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