What Are the Top 5 Reasons To File Bankruptcy?

There is a misconception that people file for bankruptcy because they overspend and use credit cards irresponsibly.  Although that can be the case, it is only #3 on our list.

  1. Medical Expenses  - Serious and/or rare illnesses that come with hefty medical bills covered by insurance typically also come with hefty co-pays.  According to a Harvard University Study, medical expenses account for 62% of bankruptcies.  Out of these, 78% of bankruptcy filers had medical insurance.  With rising health coverage costs and co-pays, a serious hospitalization can cause severe debt.  Once savings have been exhausted, the only option left to deal with medical bills may be bankruptcy. 

  2. Job Loss – Termination, layoffs, and resignations are the second leading cause of bankruptcy.  Most Americans don’t have enough money in savings to survive an unexpected job loss (especially without severance) and therefore turn to credit cards for survival.  Even once a new job is obtained, sometimes the debt incurred in between jobs is too much to catch up on. 

  3. Excessive Credit Card /Unsecured Debt – This is third on the list.  Although the debt to income ratio may be considered excessive, it doesn’t necessarily equate to irresponsible spending.  An expensive car repair or medical bill charged on a credit card with high interest can get out of hand quickly for a person with a low income. 

  4. Divorce – When one household suddenly becomes two, you’re essentially doubling expenses without doubling the income.  Combine that with the associated legal costs, alimony, and child support, the bank account dwindles quickly. 

  5. Unexpected Disasters – These are the rare occurrences that most people don’t think about or plan for… and assume if they do happen, their assets would be covered under insurance.  These include natural disasters like hurricanes or earthquakes and other disasters such as death.  Most people don’t realize that property loss under these circumstances isn’t covered under most homeowner insurance policies – typically separate insurance policies must be purchased in order to cover property & asset loss under these circumstances – in addition to covering the cost of new clothes and shelter. 

If any of these sound like your situation and you are struggling with debt, WE CAN HELP YOU!  Contact us today at (757) 276-6555. 

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Edrie Pfeiffer
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Edrie Pfeiffer, Bankruptcy & Divorce Attorney