Why people go bankrupt

On Behalf of | Sep 23, 2021 | Uncategorized |

A surprising number of people are filing for bankruptcy, and this has been the case in the past 10 to 20 years. More and more people are not able to pay off their debts in a reasonable amount of time which is why Congress addressed this financial issue in 2005 by enacting a law that made it more difficult for someone to qualify for bankruptcy. Still, though, if you are a North Carolina resident and considering this financial option to eliminate your debt, here are some of the reasons bankruptcy may be an option.

Medical expenses

According to a 2019 American Journal of Public Health study, 66.5% of bankruptcies were because of medical issues, particularly not being able to pay expensive medical bills on time due to not being able to work. Even with the millions of Americans who have health insurance, the copays, high deductibles, and job losses have caused many people to file for bankruptcy.

Serious or long-term illnesses or injuries can lead to high medical bills that can consume a family’s savings accounts, home equity, or college education funds. Once the money from these financial products runs out, bankruptcy is often the only option.

Job loss

A loss of income due to job furloughs, layoffs, or terminations can be devastating for individuals and families. While some people are able to get severance packages, many find themselves out of a job with no warning. Eventually, this can lead to bankruptcy for many people, especially if they don’t have an emergency fund.

If people have to use credit cards to pay their bills aftera job loss, this can bring on bankruptcy sooner. A 2019 Financial Security Index Poll from Bankrate states that almost 30% of Americans don’t have emergency funds to keep them afloat in a financial crisis. Many individuals see bankruptcy as a way to manage their debt while in between jobs.