Financial calamity is sometimes unavoidable. Unfortunately, something may happen in your life that leaves you struggling to make ends meet. If you are racking up debt and are considering filing for bankruptcy, you are not alone. Millions of people declare bankruptcy in America every year.
But why is bankruptcy such a prevalent issue? What brings so many people to the brink? Here are some common reasons that Americans file for consumer bankruptcy.
1. Medical bills
According to USA Today, the majority of U.S. bankruptcy filings occur due to medical bills. Health care debt is the leading cause of bankruptcy. Even if you have health care insurance you may fall victim to huge medical costs. A sudden injury or illness may drain your savings, making bankruptcy your best option.
2. Job loss
Whether it is because of a layoff, firing or resignation, losing income can be devastating. If you are lucky enough to get severance pay, you may be able to survive for a little bit until you find a new occupation. But even then, there is no guarantee when you will find a new job. Not having a job may quickly make your savings and assets go down the drain.
3. Dissolution of marriage
Divorces create a significant amount of financial stress on both people. Dividing marital assets, paying legal fees, living on a single income and making support payments may make it difficult for you to pay your bills.
4. Credit card debt
Credit is a useful tool. However, it may sometimes rack up your debt. While overspending is one issue, you may also accumulate credit debt if you use your card to cover a disability, job loss or emergency expense.
If you have financial troubles and are not able to make your mortgage payments, you may be at risk of losing your home. Filing for bankruptcy may be one way to avoid a home foreclosure.