• Bankruptcy occurs when an individual or a company legally declares that they cannot pay off creditors. Apply for bankruptcy with great care and forethought, as it can severely lower your credit score for years to come and may make it difficult to apply for credit or loan for a house or car in the future. That being said, there are some reasons to apply for bankruptcy as a last resort.
  
  

Imminent Foreclosure

• If your house is about to be foreclosed on, you may be worried about losing your house and being out on the street. By declaring for bankruptcy (specifically Chapter 13 bankruptcy) you can stop the foreclosure before the sale has occurred. This will help you structure a plan to repay the amount by which you are behind in the mortgage (called mortgage arrears).
  
  

Loss of Employment

• Many families live paycheck to paycheck and cannot afford to miss one or more of those paychecks without seriously falling behind on their debts. If one or both members of a household lose their jobs, they may have no ability to pay their debts. Without the insurance provided for by the job and without a steady paycheck, some families file bankruptcy to deal with the change in their financial situation.
  
  

Illness

• Some diseases and health problems can cause the patient tens of thousands of dollars in medical bills. Some treatment programs like for emergency medical bills and cancer treatments may even cost over $100,000 in total. Even if the patient has insurance, these expenses may quickly drain a bank account and make it impossible to pay off debts. These illnesses or health problems often come on all of a sudden and give the unfortunate patient no warning and no ability to prepare. This makes bankruptcy almost inevitable in long, drawn-out situations like this.
  
  

Reduce or Eliminate Debt

• Filing for bankruptcy can lead to a mostly clean slate in a process called a discharge of debts. This will clear most of your debts and reduce your obligations to pay. Some debts like student loans and taxes continue to remain after bankruptcy. However, these remaining debts will be consolidated into monthly payments that will be easier to pay for a low or reduced income. Debts that have been incurred from fraudulent creditors can also be challenged when bankruptcy is filed. This process will stop the fraudulent reporting and give you a chance to challenge them and clear your name.