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What are the most common reasons for bankruptcy?

In most cases, going bankruptcy isn’t about poor money management skills. In many cases, people are forced to file for bankruptcy protection because of outside factors that are out of their control such as losing a job or getting seriously sick or injured.

In fact, the Huffington Post recently featured an article listing the top 10 reasons people file for bankruptcy and bad budgeting barely made the list at No. 10. The article listed medical expenses as being the No. 1 reason people go bankrupt, which comes as no surprise. 

It reported that Harvard University found that about 62 percent of personal bankruptcies result because of overwhelming medical expenses that people cannot afford to pay back. As we explained in a past post, even with insurance, hospital bills can add up and leave people bankrupt.

The No. 2 reason people go bankrupt is income reduction, the article stated. This became a major problem during and after the recent economic recession, even for people who kept their jobs. However, with a lower income, they were often left unable to meet their monthly expenses and debt racked up as a result.

The article listed income job loss, credit card debt and divorce as rounding out the top five reasons people file for bankruptcy. Unexpected emergencies, student loans, utility payments, foreclosure, and bad budgeting or overspending made up the last five most common reasons people file.

You can read the article in its entirety here.

No matter what a person’s reason for filing for bankruptcy is, they should know that that debt relief is possible and that they are certainly not alone. More than 1.5 million Americans per year achieve a financial fresh start by filing for bankruptcy.

With guidance and support from an experienced bankruptcy attorney, you can be one of these people.

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