The Most Common Reasons For Bankruptcy Might Not Be What You Think

Posted on: 8 December 2016

There are many reasons people go into debt and must declare bankruptcy. The reasons are as varied as the people who file. While most people think the majority of bankruptcy filings has to do with overspending and credit card debt, they are not in the top 4 reasons. The most common reasons for bankruptcy might not be what you think they are.

Medical Expenses

The number one reason people go into debt and declare bankruptcy is the high cost of their medical bills. What is even more interesting, is that most of these filings include people who have health insurance. There are actually millions of people in the United States who must file bankruptcy due to their medical bills exceeding what they can afford to pay.

Lower Income

The second highest reason for bankruptcy within the United States is employee's receiving pay cuts and reductions of bonus payments. This is due to companies cutting their expenses and reducing salaries and even cutting out bonuses they used to pay. The lower income may result in those with mortgages or high rental fees paying out more than they are earning.

Loss of a Job

Some companies will give severance pay to those employees they are laying off but it may not be enough to cover living expenses, even the basics like food and utilities can run pretty high. It may not be easy to find a new job and even if a job is found, it might not be the same income as earned previously and yet those expenses still must be paid. It isn't hard to get into debt when you have a much lower income than previously earned.

Credit Card Debt

Most people think credit card debt is solely due to overspending and being irresponsible, that simply isn't the case. There are plenty of cases where people have gotten into credit card debt due to medical emergencies, job loss, emergency expenses, disability or income reduction. These people still have the same expenses they always had, but with a reduced capacity to pay for them. The easiest way to pay at the moment is their credit card, which can quickly lead to credit card debt.

Utility Payments

The costs of heating or cooling the home or having electricity and water can be so high for homeowners, they must resort to declaring bankruptcy to get out from under the debt. There have been some instances of people owning thousands of dollars for their heating or electric bills and have either been cut off or they have filed for bankruptcy because they couldn't pay the high cost.

To learn more, contact a law firm like Tim George & Associates