Contrary to popular belief, most bankruptcy cases aren’t the result of reckless spending, but rather financial hardship. In a country where over three-fourths of all full-time workers live paycheck to paycheck, large, unpredictable expenses or an interruption in income can quickly derail a person’s finances and make it virtually impossible to get back on track on their own.
According to a recent study, two-thirds of all people who file for bankruptcy in the U.S. cite medical issues as the primary contributor to their financial downfall due to the high cost of care or time missed at work. An estimated 530,000 families file for bankruptcy every year due to medical issues and bills.
Unfortunately, despite gains in healthcare coverage and access to care in the U.S. from the Affordable Care Act (ACA), the law did not change the proportion of bankruptcies due to medical issues. That means even those with health insurance aren’t immune from going bankrupt.
What other reasons do people file for bankruptcy?
While medical problems and expenses make up the majority of bankruptcy cases, the study found that the other most common reasons Americans went bankrupt include:
- Unaffordable mortgages or foreclosure
- Living beyond one’s means
- Providing financial help to family or friends
- Student loans
- Divorce or separation
The bottom line
Many people assume those who go bankrupt are financially irresponsible, but the reality is it’s all too easy to lose control of your finances when dealing with the aftermath of medical bills or lost time at work. If you are drowning in debt due to an unexpected life event, bankruptcy can provide you with the clean slate you need to thrive again.