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The Common Reasons People File for Bankruptcy


People who file for bankruptcy are not irresponsible, lazy, or “taking advantage of the system.” Nobody wants to file for bankruptcy. It is a difficult financial decision to make, but it often is the best financial decision for the people who file. It is also a legal right.

The vast majority of people who file for bankruptcy are honest people who fell on hard financial times that were beyond their control. There are life events that adversely affect finances and are the most common reasons why people file for bankruptcy protection.

Medical Debt

An article published in The American Journal of Medicine revealed that 62.1% of all bankruptcies had a medical cause. The article was published in 2009 and was based on a study conducted on all bankruptcies filed in 2007. Nearly two-thirds of all bankruptcies had a medical cause.

Certainly, health care in the U.S. has changed since 2007 and is still evolving. Though the number of uninsured Americans has decreased, a survey conducted by The New York Times and the Kaiser Family Foundation found that “roughly 20 percent of people under age 65 with health insurance nonetheless reported having problems paying their medical bills over the last year. By comparison, 53 percent of people without insurance said the same.”

Health insurance plans often require hundreds or thousands of dollars of out-of-pocket payments, like hefty deductibles, high-percentage coinsurance, and copays. These payments can create serious financial troubles. Medical debt that is beyond a person’s ability to pay back happens even to people with health insurance.

Also, consider that medical debt may not be in the form of medical bills – but may be carried on credit cards from paying medical bills, buying necessary medications, and charging other costs associated with a medical crisis or health care needs.

Job Loss & Unemployment

Many American families do not have adequate savings to cover even a short period of unemployment.

In a recent Bankrate survey, 41 percent of adults said they could pay for a $1,000 unexpected cost from savings. In the same survey, 3 out of 5 participants said they had a major unexpected expense in the past year. The most common unexpected expenses are related to transportation, appliances, other home-related breakdowns, injury, or illness.

For the 59 percent of American who do not have $1,000 in savings, a few weeks or months of unemployment can be financially catastrophic. Running up credit card debt or taking out loans to stay afloat may be necessary. Then, even if new employment is secured quickly after a job loss, paying off the debt incurred while also paying current monthly bills as they become due may prove impossible.


First, divorce is expensive. It typically involves court costs, attorneys fees, and the costs of maintaining two separate households. Second, if there were financial problems prior to the divorce, it is likely that the financial problems will be even worse after divorce.

When you look closely at the devastating affects these three life events can have on finances, it is no surprise that these are the most common reasons why people file for bankruptcy.

Making the Decision to File for Bankruptcy

Filing for bankruptcy is not shameful. Certainly, it is a difficult financial decision, but bankruptcy can also be the best financial decision. Come meet with us for a free consultation to learn about how bankruptcy will affect you. You may be surprised to learn that many people who file for bankruptcy get to keep most or all of their belongings. You may also be surprised to learn that bankruptcy is not a courtroom battle.

Here at the Law Office of Barbara B. Braziel we will make sure you understand the benefits of bankruptcy and how filing with affect you and your family. We take the time to explain the bankruptcy process to our clients. We invite you to learn more about our firm here and come meet with us for a free no-obligation consultation.

Reach out to us by email at or call (833) 522-1069.

We are a debt relief agency. We help people file for bankruptcy relief under the U.S. Bankruptcy Code.

The post The Common Reasons People File for Bankruptcy appeared first on Braziel Law.

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