The Most Common Causes of Bankruptcy

Business, Lifestyle
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If you’re considering filing for bankruptcy, you should understand that there are many different reasons for filing. Financially unsustainable mortgages is one of the fastest growing reasons for filing for bankruptcy, but other causes may be more pressing. These include medical expenses, divorce, and natural disasters. However, even with the help of the Affordable Care Act (ACA), some people still find themselves in the position of being unable to repay their debt. In fact, one Stanford University study suggests that ACA may have contributed to the problem.

Job loss

Whether due to layoffs, termination, resignation or other reasons, job loss can be devastating to a person’s finances. While some companies offer severance packages, most Americans live paycheck to paycheck and a prolonged period of unemployment makes it difficult to meet expenses, including a mortgage, rent, and credit card payments.

Job loss is one of the most common causes of bankruptcy. Without a steady income, people can easily get into debt by maxing out their credit cards or taking out loans. This often leads to an even worse financial situation, making bankruptcy more likely.


Divorce is one of the most common reasons that couples file for bankruptcy. It’s important for couples to understand the financial implications of divorce before filing for bankruptcy. One of the biggest mistakes couples make is postponing bankruptcy until after the divorce. However, there is a better way to approach divorce and bankruptcy.

When filing for bankruptcy, it’s best for both partners to file jointly. This will increase the number of exemptions that each partner can receive. If they have joint property, both of them will be able to benefit from the homestead and wildcard exemptions. A homestead exemption can protect all of the equity in your home.

Medical expenses

According to a Stanford University study, medical expenses are one of the most common causes of bankruptcy, accounting for nearly half of all filings. This data is important, as it provides the first comprehensive look at the cause of medical bankruptcy. In the past, research on medical bankruptcy has been hampered by the fact that debtors are often unwilling to discuss their debts. Only half of those filing for bankruptcy publicly acknowledge that they had medical debt.

According to the study, medical bankruptcies have increased from 62.1 percent in 2007 to 66.5 percent from 2013 to 2016. The study noted that between 2007 and 2013, the Affordable Care Act (ACA) was implemented, which may have contributed to this upward trend. The researchers examined data on a random sample of California hospital patients to determine whether medical debt was a leading factor in filing for bankruptcy. The study also found that medical bankruptcies were associated with a large proportion of low-income households.

Natural disasters

There is a definite correlation between natural disasters and a person’s likelihood of filing for bankruptcy. Since disasters tend to happen randomly, there’s no way to accurately predict which disasters will affect more people than others. However, trends tend to stay the same even after a major disaster.

Natural disasters are devastating. The most common types of these events include floods and storms. People who live in floodplains and without warning systems are at risk, as floods can cause huge damage to buildings and personal property.


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