The word bankruptcy often conjures images of people living well beyond their means. People might think of new adults who get credit cards and then max them out by buying luxury items. However, that only accounts for a small portion of annual bankruptcy filings.
Most people considering bankruptcy have long lived financially responsible lives and have unexpected situations that push them to the brink. What are some of the leading causes of personal bankruptcy among adults?
1. Medical debt
A common reason for people to file personal bankruptcy is actually medical debt, not credit card spending. All it takes is a cancer diagnosis or a car crash caused by someone without insurance for you to have more medical bills than you can possibly repay. People with cancer, in particular, have a significantly elevated risk of filing for bankruptcy after completing their treatments because of the huge costs involved.
Some people find themselves considering bankruptcy after the end of their marriage. The outcome of property division proceedings might leave one person with a significant amount of debt and insufficient personal property to fully repay those debts.
Other times, it will be support obligations and the pressure it puts on someone’s budget that of course them to consider bankruptcy. A divorced adult may have a hard time paying rent and meeting their other cost of living expenses while subject to support obligations and paying off their court costs.
3. A job loss
Perhaps you suffered some kind of medical event, like a stroke, that forced you to leave your job before you were ready to retire. Maybe your employer went out of business, leaving you with no income and few prospects for a comparable position elsewhere. Some people have been financially responsible for years and then find themselves on the cusp of poverty within a few months because they cannot fulfill their financial obligations after losing their jobs.
Instead of worrying about how people will judge you if you filed for bankruptcy, it is likely a better approach to think about how you will benefit from reducing the financial pressure you currently experience. Recognizing that filing for bankruptcy is not a personal failure could help you finally make the decision to retake control over your financial circumstances.