In the wake of the Great Recession in 2008, many Americans were pushed into bankruptcy. While the number of personal filings is now steadily declining, many individuals still struggle with managing their debts. In fact, the top five reasons people file for bankruptcy include:

• Medical Expenses
• Job Loss
• Creditor Debt
• Divorce
• Unexpected Expenses

Medical Expenses

It has been estimated that medical expenses account for more than 60 percent of personal bankruptcies. In short, a catastrophic illness or injury can easily result in hundreds of thousands of dollars in medical bills. Although the Affordable Care Act mandates that all Americans have health insurance, paying high deductibles and other costs can still deplete savings and other financial resources.  

Job Loss

A layoff, firing or resignation can have serious financial consequences. Although some people who are laid off may receive severance pay and others might have emergency funds to tap, a sudden, unexpected loss of income can be devastating. In these circumstances, some many individuals use credit cards to cover their expenses. A prolonged period of joblessness can make it difficult to pay creditors, and many people ultimately face collection activities and lawsuits.

Credit Debt

Even for those who use credit cards responsibly, debts can become insurmountable due to an  illness, disability, job loss or other unexpected circumstance. When a debtor cannot make the minimum payment and friends or family are unable or unwilling to loan the money, the only alternative may be bankruptcy. Although a debt-consolidation may buy some time, most repayment plans only delay bankruptcy filings.

Divorce

A marital breakup in never easy, and both partners may be left with unexpected financial burdens, such as legal fees. The resolution of key issues such as the division of property, spousal maintenance, and child support could have a significant financial impact on either partner.

Additionally, each will be responsible for the costs of maintaining two separate households.

Unexpected Expenses

Unexpected expenses such as a costly car repair or property damage from a catastrophic storm can easily drain a person’s savings. While homeowner's insurance wis designed to cover some of these losses, receiving the full value of a claim is a daunting challenge. There may also be other expenses, such as locating temporary shelter and incurring more debt to make up any shortfalls.

The Takeaway

Regardless of the circumstances, filing for bankruptcy is a serious consideration that will have long lasting consequences. Nonetheless, it may give you the chance to eliminate or reorganize your debts and get back on your feet. By engaging the services of an experienced bankruptcy attorney, you can explore all of your options.