Main causes of bankruptcy.

When ever I speak with members of the public about what I do, people automatically start in with the typical myths about bankruptcy.  They talk about “those people” and “irresponsible behavior.”  However, what they need to realize is that most people who file bankruptcy are good, upstanding citizens who simply had a something go wrong in their life.
42% of all personal bankruptcies are the result of medical expenses.  Of these individuals, 78% had medical insurance.  These individuals were doing everything right.  Most were working, carrying insurance and only borrowing what they could afford to repay.  Then a major health concern drove them down a path to financial disaster.  In my experience, most of these people have never missed a payment and would never have imagined themselves having to seek a fresh start through bankruptcy.
22% of individuals who filed bankruptcy are unemployed.  When I see these individuals they tend to be people who have had a job all their life.  They spend their lives taking care of everyone but themselves.  They put their kids through college, take care of their parents in their old age, and donate to church and charity.  They assume that because they work hard and contribute to society that they can save for the future later.  Then when the future gets here they don’t have money available to get through what is often a prolonged period of unemployment.
Only 15% of personal bankruptcies are the result of over spending.  These are the individuals who quote credit card bills, large mortgages or excessive car payments as the primary cause of filing bankruptcy.  For these individuals, uncontrolled spending has led them down a path that led to financial disaster.  However, with proper counselling, bankruptcy can not only lead to a fresh start, but also new habits that will make their lives better.
8% of personal bankruptcies are filed because due to the burden of child support, alimony or the burden or raising a family on a single income.  For these individuals their dedication to family has led their personal finances to the brink of collapse.  While child support and alimony are not dischargeable, most of these individuals have occurred other debts in order to remain current on their familial obligations.
7% of personal bankruptcies are the result of a major disaster.  House fires, tornadoes and other natural disasters can cause individuals who are not properly prepared to seek the protection of the bankruptcy courts in order to get back on their feet.
If someone you know needs a fresh start it is important that you don’t judge them.  Don’t make them feel that by filing bankruptcy they are doing something morally corrupt.  Understand that they need help and guide them to a qualified bankruptcy attorney.