Bankruptcy is often a result of a series of unfortunate financial events. While each person’s situation is unique, certain reasons consistently lead individuals to seek bankruptcy relief. Here are the top 5 reasons people file for bankruptcy:
1. Loss of Income
One of the most common reasons for filing bankruptcy is the loss of income. When paychecks stop—whether due to job loss, a reduction in hours, or other employment-related issues—financial troubles quickly follow. Without a regular source of income, it becomes difficult to keep up with bills, leading to mounting debt. In many cases, this can also result in a loss of health insurance, which exacerbates financial hardship, especially if medical emergencies arise.
2. Medical Expenses
The high cost of medical care remains a significant financial burden for many. Even with insurance, out-of-pocket expenses, deductibles, and co-pays can pile up. For individuals who lose their job and no longer have health insurance, medical debt becomes even more challenging to manage. Unfortunately, health problems often lead to missed work, which compounds the issue, creating a vicious cycle of debt. It’s one of the leading causes of personal bankruptcies in the U.S.
3. Unaffordable Mortgage / Foreclosure
For many, a mortgage represents the largest debt they will ever incur. But when life changes, such as job loss, rising interest rates, or unexpected expenses, keeping up with mortgage payments becomes difficult. When mortgage payments become unaffordable, the risk of foreclosure increases. This often leads to bankruptcy filings, as individuals look for relief from home debt and the potential loss of their largest asset— homestead.
4. Living Beyond Their Means
Sometimes, the reason behind filing for bankruptcy is simply living beyond one’s financial means. Credit cards, loans, and other forms of borrowing can quickly spiral out of control if not managed carefully. What starts as a small purchase can grow into an insurmountable amount of debt due to high interest rates and late fees. Many people are surprised by the total amount of debt they accumulate without realizing how quickly it can escalate.
5. Trying to Help Family Members
Another significant reason people file for bankruptcy is trying to help family members, particularly adult children. While parents often want to support their children, taking on their debts or financially supporting them for extended periods can create substantial financial strain. This often leads to a situation where the person trying to help ends up with more debt than they can manage, pushing them toward bankruptcy. Whether it’s paying off credit cards, covering rent, or assisting with other living expenses, these acts of kindness can sometimes backfire financially.
Takeaway:
There is rarely just one reason someone files for bankruptcy. It is usually a combination of factors, such as job loss, medical issues, mortgage troubles, and financial support for family members, that pushes someone to seek relief. Bankruptcy can offer a fresh start and the opportunity to regain control of your finances, no matter what life challenges you’ve faced. If you’re dealing with overwhelming debt from divorce, accidents, student loans, or other financial burdens, bankruptcy may be the solution to help you move forward.
Need Help?
If you find yourself facing financial difficulties, don’t hesitate to consult with our office. We can help you explore your options and guide you through the process of filing for bankruptcy to get the relief you need.
