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What are the most common reasons people go bankrupt?

On Behalf of | Oct 2, 2019 | Firm News |

Over the last few decades, the number of people who file for bankruptcy in California and throughout the country has risen. Some experts call the trend alarming as more Americans cannot pay off their debts. Investopedia mentions that Congress is starting to address the issue by making it harder to file for bankruptcy, but some of the reasons you may need to file are out of your control.

The biggest reason that people file for bankruptcy is medical expenses. Harvard University released a study showing that 62% of all personal bankruptcies were caused by excessive medical debt. One interesting part of this is that a large portion of the filers had some type of health insurance, which disproves the belief that only those without insurance have excessive medical debt.

Job loss is the second most common reason that people file for bankruptcy. You cannot predict when you are going to be the target of a termination or layoff and if you do not get a severance package and cannot find a job quickly, you may drain your emergency fund and rely on credit cards to pay bills. Another aspect of job loss is that you may also lose health insurance, which leads to excessive medical debt.

The third most common reason that people file for bankruptcy is the excessive use of credit. There are those who will always struggle to control their spending. Loan payments, car payments, installment debt and credit card bills can quickly spiral out of control and lead to smothering debt. Many turn to debt consolidation but statistics show that this process only delays filing for bankruptcy.

No matter what caused you to file for bankruptcy, it can lead to a fresh financial start. If you are considering bankruptcy but are not sure if it is right for you, you may benefit from speaking to an attorney.

This is for educational purposes and should not be interpreted as legal advice.