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3 top causes of bankruptcy

On Behalf of | Nov 3, 2022 | Bankruptcy

Historically, there has been a stigma associated with bankruptcy.

This is far from the truth, that bankruptcy is simply a valuable tool offered by the government to give those in a hard place a way out of crippling debt. There are many possible causes of bankruptcy, but many of the top ones involve situations every individual is vulnerable to.

1. Medical bills

A sudden accident or cancer diagnosis can cost a person on top of the world everything. Even with insurance, healthcare bills can be costly, and for those without it, they can be mountains. A hard-working family head can have a healthy savings account and rainy day fund and a well-paying job and still find him or herself facing bankruptcy. The sickness may cost him or her that employment, which may mean no more insurance. The saved money, including retirement savings and college funds, can drain rapidly in the face of mounting bills, leading to unexpected and desperate situations.

2. Mortgages

Owning a home is a part of the American dream that younger generations increasingly find beyond them. Cost-prohibitive mortgage payments are a common cause of bankruptcy. Even those able to afford it at one time may no longer be able to later if they suddenly lose their employment or find themselves on indefinite furlough.

3. Overspending

Americans have a culture of commercialism and credit card debt. Media teaches them to want the newest and the shiniest products, and credit card companies tell them they can have them without saving. It is easy to fall into a trap of stacking up credit card debt and interest.

Bankruptcy is not uncommon. Many who file for it are in circumstances they cannot help or fell into because of cultural influence.