The 5 Most Common Reasons Why People File For Bankruptcy
In the United States, over one million people file for personal bankruptcy every year. The reasons are numerous, but in only a few causes account for the majority of bankruptcy cases. In many cases it is not the person’s fault at all. Let’s look at the top five reasons why people file for bankruptcy.
Number One: Medical Expenses
The cost of medical care can be very expensive. This can be due to unexpected illness, surgeries, medications, or the cost of rehabilitation. Also, an elderly or disabled person’s care can add up to thousands of dollars every year. Medical insurance is often not enough to cover these costs. Also, there are many people who do not have medical insurance, but they still must cover their medical expenses. People facing rising medical costs can get into a debt situation they cannot repay. In these cases, filing for bankruptcy may be the only solution.
Number Two: Job Loss
The loss of employment can be devastating to personal finances. Even though the bills keep coming in (mortgage, car payment, credit card bills, etc.) there is suddenly no income to cover these costs. A debt situation that is impossible to overcome can be the result. This is a common scenario leading to bankruptcy.
Number Three: Credit Problems
Credit is a common way in which people manage their finances. Sometimes credit can get out of control. This could be due to unexpected expenses, poor money management, or the loss of a job. Many times penalties and interest quickly make a bad credit situation grow out of control, and it becomes impossible to repay the full debt. Bankruptcy can offer a solution to unresolvable credit problems.
Number Four: Divorce Or Separation
In some circumstances, the terms of divorce or separation can be costly. It might mean the sudden loss of income or the need to find a living space with limited economic resources. Many times the persons affected must go into debt just to cover the costs of daily living. If this debt grows unpaid, the best resolution may be to file for personal bankruptcy.
Number Five: Unexpected Expenses
Life sometimes throws us a curveball. Things like accidents, natural disasters, or unwise investments can present large expenses or a sudden cash shortage. Loans might have to be taken to cover these emergency costs. However, the repayment terms might be too steep for a person’s income to cover. In this case, personal bankruptcy might be the only way to recover.
Bankruptcy Is A Solution, Not A Punishment
As we can see, in many instances, the top reasons people file for bankruptcy are of no fault of their own. This is one of the main reasons bankruptcy law exists: to help people repay insurmountable debt under terms that creditors will accept. Good legal advice is important in order to make sure the process goes smoothly and that nothing is overlooked. You are entitled to keep certain property or assets under the protection of the law.
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