The number of yearly bankruptcy filings in the United States has increased steadily over the last century, peaking at two million in 2005. It’s easy to draw a correlation between the rate of bankruptcy and the overall economic health of the country, but what are common individual reasons why people choose to file? Following are the top 10 reasons people file for bankruptcy:
- Medical expenses: A study by Harvard University found that 62 percent of all personal bankruptcies in the United States were due to medical expenses. And it’s not just the uninsured who file for bankruptcy; the Harvard study also found that 72 percent of those who declare bankruptcy because of medical expenses did have some type of health insurance.
- Reduced income: When companies are going through lean periods, they often cut their employees’ hours and pay, and eliminate bonuses. Unfortunately, the employees’ bills and expenses aren’t reduced at the same time.
- Job loss: When someone suddenly loses his job and income, it’s easy to use up savings and go into debt; especially with new expenses like COBRA health insurance. The longer a person stays out of work, the more likely he will need to file for bankruptcy.
- Credit debt: It’s easy for debt to pile up, especially with compounding interest. And credit debt isn’t always the result of irresponsible spending; it can also be the result of an illness, sudden job loss, emergency expenses, and more.
- Divorce: Divorce can be expensive for many reasons. One could experience a significant loss of income and be saddled with a portion of an ex-partner’s debt.
- Unexpected expenses: Emergencies don’t wait for a convenient time, they just happen. It could be severe storm damage, car repairs, a needed house repair, etc.
- Student loans: Student loans account for at least one percent of all bankruptcies in the U.S. That translates into about 15,000 cases a year. It’s not uncommon for recent grads to find out that they won’t make the salary they’d hoped for, leaving them with hefty loans to pay off.
- Utility payments: For homeowners, rising costs of utilities can become overwhelming. Many of them go into debt paying their gas, electricity, water, and trash bills.
- Foreclosure: In many cases, filing for bankruptcy can delay or prevent foreclosure. Statistics show that over one percent of American homeowners file for bankruptcy to avoid foreclosure.
- Overspending and bad budgeting: Living beyond one’s means, overusing credit cards, and not sticking to a budget can put someone under an increasing pile of debt that is nearly impossible crawl out from, forcing him or her to file for bankruptcy.
No one wants to declare bankruptcy, but in some cases it becomes necessary in order to move on with one’s life. If you find yourself in dire financial straits and are considering bankruptcy, you need to contact the experienced bankruptcy and debt relief attorneys at Cal West Law. Call (818) 446-1334 for a free case evaluation.