In today’s economy, bankruptcies are more common than ever, however, this years number of bankruptcies are down 2.8% from last year. There are many factors that go into people filing for bankruptcy but what are the main reasons?
Here are the top 10 reasons for bankruptcy:
1. Medical Expenses
A study done by Harvard University revealed that the leading cause to bankruptcy is due to medical expenses. These expenses account or a whopping 62 percent of all reported bankruptcies. The study also showed that 72 percent of the people who filed due to medical expenses had some sort of health insurance.
2. Reduced Income
Because companies sometimes have to cut expenses, it ultimately means that employees must take pay cuts and bonus reductions.
3. Job Loss
Unfortunately, the reduced income discussed above sometimes leads to losing your job. Losing your job can lead to completely losing your savings in the process.
4. Credit Debt
This kind of debt is not always from irresponsible spending. Credit card debt can add up when unexpected tragedies happen and you have no choice to use cards to pay for such things.
Getting a divorce can cost a pretty penny even discarding the divorce lawyer fees you’ll have to pay. Divorce might mean a loss of income and assets for one or both individuals.
6. Unexpected Expenses
Emergencies happen in this thing called life and most of the time, people aren’t prepared for the expenses that come with unexpected disasters. No matter how small or large, these types of expenses can drain people’s savings, sometimes leaving them with only one option; filing for bankruptcy.
7. Student Loans
You’re not the only one that hasn’t paid of your student loans yet. Studies show that student loans account for 1% of all filed bankruptcies. That 1% translates to approximately 15,000 bankruptcies a year.
8. Utility Payments
With rising costs in real estate, the utility payments people have to pay are also increasing. Heat, electricity and other necessities are paving the way to bankruptcies.
To avoid foreclosure on their homes, more than 1% of americans are prompted to file for bankruptcies. This allows for people to re-organize their debt which may prevent them having to foreclose in the future.
10. Bad Budgeting/ Overspending
Managing money is harder than ever thanks to inflation. A combination of bad budgeting and a habit of spending too much money can cause your debt to skyrocket and lead you to bankruptcy a lot faster than ever expected.