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Top five causes of bankruptcy

Personal debt is growing nationwide. It seems that Americans are spending more money than they make, leaving them with thousands of dollars in debt. Surprisingly, overspending is not the leading cause of debt.

  1. Medical bills. Nearly 62% of all personal bankruptcies filed are due to medical expenses. Severe illnesses can cost thousands of dollars—even with insurance coverage. Not only do the medical bills cause a financial strain, but the recovery time that keeps a patient away from work may cause lost wages.
  2. Lost wages. Permanent or temporary time away from work often entail time without pay. Americans may not be able to afford their mortgage, car payment and other living expenses if a primary financial provider suddenly stops making money.
  3. Credit card debt. Uncontrollable credit card spending often leads to bankruptcy. Overspending may impact house payments, car loans and other expenses, causing debt to spiral out of control—making it impossible to pay it all back.
  4. Divorce. Divorce is expensive for both parties. Legal fees, the division of assets and child custody agreements can be messy and costly. If you have to pay alimony or child support, your finances will really take a hit.
  5. Unexpected expenses. Unexpected medical expenses, natural disasters, burglary, and other unforeseen expenses are the fifth most common cause of bankruptcy. Keeping an emergency fund may help cover unexpected expenses.

If you find yourself with uncontrollable debt, bankruptcy may be the right move for you. Depending on the type of bankruptcy you file, you may be able to repay your debt over time or eliminate it completely. Filing for bankruptcy may give you a fresh start.

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