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5 Common Reasons for Bankruptcy

Posted by Cha'Ron Ballard on July 16, 2015

There is a stigma that bankruptcy is only for people who have irresponsible spending habits or are trying to avoid owning up to their mistakes. This is simply not true. People file bankruptcy for many reasons, and the circumstances that put them in such a crisis are not always their fault.

5 Common Reasons for Bankruptcy

Medical Bills

Unforeseen injuries or falling seriously ill can place major financial burden on a person and their family. Even people with health insurance sometimes find it hard to avoid the crippling debt accrued from medical bills. As the graphic points out, an overwhelming majority of people who filed for bankruptcy because of exorbitant medical expenses actually had health insurance. Unfortunate as this is, it happens to people nearly every day.

 

Unemployment

Many people lose their jobs due to no fault of their own. Businesses that are unable to stay open or downsize to cut costs leave their employees jobless. And although the job market continues to turn around, many people are still unable to find work where they can earn enough money to pay off their debts. Faced with prolonged unemployment, people often turn to bankruptcy for the financial relief they so desperately need.

 

Credit Debt

People with low-wage jobs often find it difficult to pay for everyday expenses, forcing many of them to use credit cards to cover the cost. This can cause a person to quickly rack up an unmanageable amount of debt. As the debt continues to mount, it becomes too great for them to handle, sometimes making bankruptcy the only way out.

 

Divorce

Divorce can place heavy financial burden on both parties involved. After the lawyers are finished drawing up the paperwork, one spouse could end up with more than the other, which could leave one of them in a bad financial position. When this happens, the person left with less oftentimes has to file for bankruptcy to get their life back in order.

 

Surprise Expenses

We already mentioned unplanned medical expenses, but sometimes surprise expenses come in the form of natural disasters, accidental fires, or necessary maintenance on a vehicle or home. A tornado or flood has the power to take away everything you have, and some people simply don’t receive the money they need to rebuild their lives. For these people, bankruptcy is the only way to reclaim some portion of what was taken from them.

Filing for bankruptcy should not be met with shame. Sometimes it’s the only practical way out of an unfortunate situation. It has given many people the opportunity to begin their lives anew and reclaim their financial independence.

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