Increased cost of living can make it impossible to make ends meet.
We've all seen the headlines about inflation and felt the pain at the pump, the grocery store, and so on. Prices for a wide variety of goods and services have increased, and salaries haven't kept up with those increased costs.
For hardworking people who were already struggling to make ends meet, the increased cost of living from post-pandemic inflation can make that situation unsustainable. As dedicated South Carolina bankruptcy attorneys, we are seeing more and more bankruptcy cases where inflation is a contributing factor.
How does inflation contribute to bankruptcy filings?
Inflation, in and of itself, is rarely the cause of bankruptcy. Indeed, historically, it has been considered incidental at best in the bankruptcy world. The primary causes of bankruptcy filings are the same as they've always been: high medical expenses, loss of income, divorce, and other unexpected life events.
However, for someone already struggling with debt, the current levels of inflation can be the final straw that makes it impossible to keep up with your debt. This is primarily because inflation has significantly increased the cost of living, and when a larger percentage of your income goes to groceries, transportation, and other unavoidable living expenses, that means you have fewer dollars available to devote to debt repayment. A related problem is loss of purchasing power — that is, your money simply doesn't stretch as far as it used to. This is particularly frightening for people on fixed incomes.
Inflation has also contributed to higher interest rates on some types of debt such as credit cards. This is a critical factor in bankruptcy because at higher interest rates, more of each payment goes to interest, and thus less of each payment goes to pay down the principal. This can make it difficult or impossible to pay down your debts.
In short, inflation means that it is significantly harder to actually pay off your debts and much easier to end up in a downward spiral where your debt increases each month. When your finances are stretched to the breaking point and you can't afford to live, bankruptcy provides an exit and a fresh start.
If you're trapped by debt due to circumstances beyond your control, we can help.
The current inflation crisis is an illustration of a broader truth: bankruptcy is not a result of personal failings. Usually, it's caused by factors beyond the debtor's control. Inflation is a global problem that is playing out in individual lives, and some of those consequences tip the scales into bankruptcy territory. If you're in this situation, that doesn't mean you didn't work hard enough or manage your finances well enough. It just means you need a fresh start.
If you are considering filing Chapter 7 or Chapter 13 bankruptcy, we can listen to your story and explain your options. There's no cost and no obligation to hire us, and the conversation is fully confidential. Schedule your free consultation with Benjamin R. Matthews & Associates today.