Top Reasons Why People Go Bankrupt
Bankruptcy statistics in the US are going up the past few decades have seen a dramatic increase in the number of people who file for bankruptcy. According to the US bankruptcy courts, more than 1.5 million people will file for bankruptcy every year.
Moreover, many bankruptcy filings are made by individuals rather than businesses. This is because bankruptcy is the solution to getting a fresh start away from financial trouble. These numbers, however, are justifiable because situations that lead to bankruptcy can happen to almost anyone at any time.
Many of the reasons why people go bankrupt are more common than you would think. Overspending on luxury items is lower on the list than you would think. The top reasons are more down to earth.
- Medical Expenses– a study published in the American Journal of Public Health back in 2019 indicated that the weight of unpayable medical bills caused 66 % of all bankruptcies in the US. Moreover, 72% of these people hand medical insurance covers which. This goes to disprove the theory that only the uninsured will go bankrupt due to medical bills.
- Job loss– whether it is termination, getting laid off, or resignation, losing the income from a job is disruptive to your life. Bankruptcy rate increases with job loss as you will be forced to pay for expenses without a stable income. Plus, if you do not have a proper signs account that you can use to pay off bills until you find another source of income, you increase your chances of filing for bankruptcy. Unfortunately, statistics have shown that three out of ten Americans do not have savings accounts.
- Unexpected expenses– unexpected expenses are just that, unexpected. Loss of property in the event of an earthquake, flood, or any other natural disaster where the owner is not insured can force some into bankruptcy. Many people do not have adequate coverage for such events and are more likely to lose a lot. They will have to replace items, find immediate shelter, food, and more.
- Divorce or separation– marital disagreements bring in a lot of costs even before you factor in the price of a divorce lawyer. The legal fees are followed by alimony, degree of child support, division of marital assets, and finally, the cost of keeping two households afloat. It may also mean that you would have to take a portion of your partner’s debt if you co-signed on something or had a joint account. The combination of these debts can become unmanageable very quickly, and many spouses end up filing for bankruptcy.
- Student loans- if you have not yet paid off your student loans, you are not alone. Statistics show that inability to pay student loans account for one percent of all bankruptcies a year. This means that roughly 15,000 bankruptcies every year are as a result of student loans.
- Foreclosure– finally, one of the most common solutions for people facing foreclosure because they were unable to keep up with mortgage fees is bankruptcy. Approximately one percent of all bankruptcies each year are done to prevent foreclosure.