A common misconception about bankruptcy petitioners is that they filed bankruptcy after irresponsibly overspending on credit card accounts. While this is sometimes the case, it is an oversimplification, and it isn’t even the most common reason to file for Chapter 7 bankruptcy.
Top 5 Reasons Americans File Chapter 7 Bankruptcy:
- Medical Expenses
- Excessive Unsecured Debt (Credit Card Debt)
As you can see, irresponsible spending, while not unheard of, is not the leading cause of bankruptcy. For most bankruptcy petitioners, the reason they filed was actually due to medical expenses. In some cases, it may be a chronic illness requiring expensive, long-term care. In others, a family may have been surprised by a rare illness that resulted in significant medical bills out of the blue. In today’s marketplace, even “good” insurance coverage often comes with hefty copays and deductibles. Deductibles and copays so high that the typical American family cannot afford to be sick. According to a recent study by Harvard University, 62% of filers sought bankruptcy due to medical expenses. And out of this group seeking bankruptcy protection due to extraordinary medical bills, 78% had medical insurance.
Job loss accounts for the next significant chunk of bankruptcy filers. Since many Americans do not have enough money in savings to cover their expenses after an unexpected or prolonged job loss, many feel credit cards are their only option. In this situation, people are eventually able to obtain employment, but the debt incurred while between jobs is often too much for them to pay off.
Excessive revolving debt (credit cards and other unsecured debts), divorce, and disasters account of most other bankruptcy filers. Credit card debt is often associated with irresponsible spending, but for many, it wasn’t necessarily frivolous spending. It may have been an expensive car repair bill that was paid for on credit or medical bills that were covered with a credit card, etc. This type of large charge can quickly get out of hand for someone in the low to the mid-income range. Divorce may seem like a strange addition to the list of top reasons to file bankruptcy until you consider the sudden need to establish two households without doubling the income. Unexpected disasters are rare occurrences. Most don’t plan for them, and many don’t realize those homeowner insurance policies do not generally cover property loss related to natural disasters like hurricanes or earthquakes. Coverage for natural disasters usually requires purchasing a separate, specific policy.
If you are in any of these impossible financial tangles, don’t give up. There is always hope. Get in touch with the experienced Tennessee and Georgia bankruptcy attorneys at Kenneth C. Rannick P.C. today. We help good people through bad times every day, and we can help you, too.