Here are the five causes that drive us to do the unthinkable.
The number one reason bankruptcy occurs is medical bills. It's understandable; it's an unexpected and sudden situation, and we assume health insurance can cover. The debt piles up as you struggle to pay monthly bills, and it gets so bad that bankruptcy is the only way out. One major injury and consider your entire savings, checking, retirement, home equity, and college funds depleted. Seventy-eight percent of medical bill bankruptcies come from people who have health insurance.
Whether you resigned, quit, terminated, or a layoff, a job loss is a loss of income entering the home. The consequences come quickly as we realize money is leaving our bank accounts and into the arms of utility bills, credit cards, COBRA/third-party insurance, and grocery bills. Paycheck to paycheck workers will feel it more quickly.
Failure to budget and prioritize ends in bankruptcy. This includes large mortgage bills, gambling, buying name brand clothing/accessories, and expensive car notes. Using credit cards to solve spending habits temporarily assist in sealing the crack until the credit card companies expect payment at the end of the month.
Splitting from marriage is so expensive these days. The lawyer's fees, court fees, alimony, child support, and asset division will eat our finances alive to the point of bankruptcy. Some divorces are messy with appeal after appeal while others are civil. On top of that, it's tough to adjust from two incomes to one.
Natural disasters like thunderstorms, tornadoes, earthquakes, and hurricanes, a death in the family, or a tree falling on your house jar our everyday lives. All these situations require coverage from insurance companies, and it's rare that insurance companies pay for any unexpected disaster without a lawsuit, much less pay in full. The credit card bills to cover damages, possible medical bills for injuries, and job loss due to distraction will push you into bankruptcy.
Bankruptcy is something we don't plan to do because we never think it would happen to us. It's something we end up doing to repair our finances. For more information on bankruptcy, contact us.