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What are the true reasons for bankruptcy?

On Behalf of | Feb 5, 2024 | Chapter 7 Bankruptcy

When it comes to bankruptcy, people sometimes assume that the only reason it happens is that a consumer makes numerous financial mistakes. In fact, this feeling of fault is even why some people – who could benefit significantly from bankruptcy themselves – will feel hesitant to file. 

But that feeling is also largely unfounded. In most cases, the top reasons for bankruptcy are things that are outside of a person’s control. In that sense, bankruptcy is just something that happens to them and it is wise to look into all potential legal options to sort out their financial future. Let’s look at a couple of examples below. 

Medical debt 

Medical debt is at least a partial cause in the majority of consumer bankruptcy cases. Even minor issues can cost thousands of dollars more than people have on hand. Some find themselves with life-long debt in just days or weeks, even when they had substantial savings before. You simply cannot always plan ahead for what life holds, and an unexpected illness or injury can change everything. 

Job loss or wage reduction 

Another common example is that people are experiencing debt issues because they’ve lost their job or seen their wages decrease. Often, they had a completely viable budget and were making wise financial decisions. But something outside of their control – like a company downsizing during an economic recession – cost them their job, and suddenly their budget no longer worked. 

Could bankruptcy be right for you? 

If you’re experiencing these types of debt issues, bankruptcy may be beneficial. Make sure you know what legal options you have to get a financial fresh start.