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What are the top reasons people file for bankruptcy?

On Behalf of | Oct 11, 2021 | Bankruptcy

Residents of Texas whose debts exceed their assets may find themselves seeking protection from the bankruptcy courts. Individual circumstances might vary, but there are several common reasons that people choose to file for bankruptcy.

The top three reasons people file for bankruptcy

Not everyone’s assumptions about why people file for bankruptcy are accurate. Contrary to what many assume, poor financial decisions are not the top causes. Medical expenses are. Even people with health insurance coverage might experience enormous expenses when dealing with a medical issue.

Job losses rank as the second top reason why people file for bankruptcy. Bills and debts might accumulate when there’s not enough income to pay for things. Sadly, someone could lose a job for reasons outside their control, such as the business facing restrictions or other issues.

Excessive borrowing might also force someone into bankruptcy. Again, poor financial management is not the only reason people suffer problems: The top two reasons, medical expenses and job losses, could force excessive borrowing. At some point, the borrowing may lead to overwhelming debt and high-interest payments.

Two other common reasons for filing bankruptcy

Divorce could lead to suffering from financial troubles. Going from a two-income to a one-income budget might lead to problems, and amassing debts may be among them. The divorce settlement could put an excessive debt burden on one spouse, which might also lead to bankruptcy.

In addition, unexpected and unavoidable expenses could cause someone to suffer a financial strain. When a person already struggles financially, dealing with further costs might move the individual closer to bankruptcy.

Bankruptcy proceedings may lead to overcoming the problems that created the financial troubles. Depending on the type of bankruptcy an individual files, they may be able to reduce or eliminate debts and get a fresh financial start.