Why do people file for bankruptcy?

Answer by  technogeek (6640)

People file bankruptcy because they create credit debt that become overwhelming due to loss of job or other financial hardships.

Answer by  patti (29325)

In the U.S., the law provides that people with debt that exceeds their incomes and assets, and who have no reasonable hope of resolving the debt, have the option to ask for relief of their debts. There are different types of bankruptcies for different situations. There are many reasons why people must considered bankruptcy.

Answer by  palaeologus (564)

Filing for bankruptcy protection gives a debtor breathing room during which obligations are legally prioritized -- collection efforts are generally stopped while bankruptcy is in effect. The debtor traditionally exits bankruptcy with either a "fresh start" (no significant assets or liabilities) or a more manageable debt-repayment plan than before.