Have you ever wondered some of the reasons for declaring bankruptcy? Is it simply irresponsibility and overspending? The answer is no! While that is certainly the case for about 15% of people, generally bankruptcy is a result of an unexpected medical event or job loss. In fact, forty-two percent of bankruptcies are caused by medical bills–and don’t expect the Affordable Health Care Act to solve this problem! More than three-quarters of filers had medical insurance. This problem is especially prevalent in California where patients may pay $291,000 for the same procedure that costs $5,400 in Arkansas. Between 2007-08, medical bills crossed the line from the one of the reasons people filed for bankruptcy to the main reason for filing.
Unemployment is second with about 22% of bankruptcy cases filed because of job loss. When finances are already tight, a termination or lay off can send individuals into bankruptcy quickly. Even with an emergency fund, long-term unemployment can have a negative affect. If credit cards are used to fill in the gap, the need to file for bankruptcy can come even more quickly. Again, this problem is even more prevalent in California where the housing market crash and unemployment directly affected a high percentage of the state population.
Other Reasons for Declaring Bankruptcy
Medical expenses and job loss are the top two, but there are other reasons for declaring bankruptcy! Take a look at the handy infographic below for more information on the Top 10 Reasons for Declaring Bankruptcy in the US!
If you are considering declaring bankruptcy, contact our bankruptcy attorneys for a free consultation here.