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What are the most common reasons people file for bankruptcy?

On Behalf of | Mar 24, 2017 | bankruptcy |

It is a common myth that those who file for bankruptcy simply have spent more money than they can afford. Many fall on hard times they did not see coming, had medical issues that were expensive or lost jobs because of layoffs and cutbacks. These are things no one can anticipate, and there are many different reasons people file for bankruptcy to get a fresh start.

Bankruptcy can relieve an overwhelming debt that consumers carry on their shoulders, and it can allow them to start over when it comes to finances. If you fall into one of the most common reasons people file for bankruptcy, it may be a valuable option for you.

Overwhelming medical expenses

You cannot control when you get sick or when an injury occurs. If you do not have the money saved up to pay for treatment, your finances may quickly spiral out of control. Research suggests that 62 percent of personal bankruptcies are filed because of overwhelming medical debt, although most of those who filed had health insurance to help cover their bills.

Loss of a job

Losing a job is not always about getting fired for breaking the rules. Cutbacks, lay-offs and resignations are all sometimes out of your hands. Being let go from a job can be incredibly devastating and adds to the stress you feel when you cannot pay your bills. If you are lucky enough to have a severance package, this may tide you over for a while, but eventually, the debt piles up and you must consider your options.

Excessive credit card use

Credit cards make it easy to buy now and pay later, but with interest rates and fees tied into many of them, it may be more than you bargained for. Installment debt, credit card bills and other loan payments quickly become troublesome once they add up. Several small payments you think you can afford turn into a giant sum that stretches your budget each month.

Separation or divorce

When you are used to two incomes and one household, separating or divorcing can wreak havoc on your finances. Not only are you forced to pay for an additional household, but the costs of divorce can also add to your debt. Alimony and child support can also put strain on an already tight budget.

Starting over with a new outlook

No matter what your debts come from, the overwhelming weight of them can have a negative effect on your personal and professional relationships and may even be hard on your health. If you are considering ways to handle debts you cannot pay, we encourage you to meet with an attorney immediately.

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