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The Most Common Causes of Bankruptcy May Surprise You

The Most Common Causes of Bankruptcy May Surprise You

The reasons people file for bankruptcy in Ohio and across the nation are almost always more complicated than “fiscal irresponsibility.” There is a common misconception that people or businesses go bankrupt because of poor money management, but that’s not usually the case.

The following are some of the most common causes of bankruptcy, and many of them have nothing to do with fiscal irresponsibility:

  • Medical expenses: Medical expenses account for approximately 62 percent of all individual bankruptcies in the United States, according to a study from Harvard University researchers. Of those who filed for bankruptcy because of massive medical debt, 72 percent had health insurance, which indicates insurance alone is not enough to stop people from going bankrupt when medical expenses pile up.
  • Loss of employment: The sad reality is that many people live paycheck to paycheck. A job loss can quickly cause them to burn through savings and assets, even if they receive severance pay.
  • Wage cuts: In an economic environment in which businesses are trying to cut expenses, wage cuts and terminations to bonuses are common. This could make staying financially healthy difficult for employees experiencing these cuts.
  • Credit card debt: Credit card debt can arise from reckless spending, but it can also quickly pile up when someone is dealing with an illness, disability, emergency expenses or a job loss. Unfortunately, many people have no choice but to turn to credit cards and loans to stay afloat in the short term, only to find themselves buried under high-interest rates.
  • Student loans: The average American who graduates from college is tens of thousands of dollars in debt due to student loans. Coupled with how difficult it can be for college grads to find decent-paying jobs, paying back those loans is not an easy task.
  • Divorce: A divorce means a sudden and significant change in income and expenses for both parties. It’s somewhat common for people to declare bankruptcy soon after a divorce, as it can be quite difficult to adjust to a new lifestyle.

If you are dealing with serious financial issues, bankruptcy offers an opportunity for a fresh financial start. Learn more about your options by contacting a knowledgeable bankruptcy attorney in Dayton at Fox & Associates Co., LPA.

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