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1.5 million people filed for bankruptcy in 2010: were you one of them? Find out the causes, and prepare to be astounded. For example, would you have guessed that 8 percent of people blame divorce for their financial woes?
Knowing the causes of bankruptcy may help you identify financial problems early, allowing you to get control before things get out of hand.
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10 Leading Causes of Bankruptcy
Percentages represent reasons an individual files bankruptcy. Sources were combined to average top reasons Americans filed.
Medical Expenses (42%)
Recent studies have shown that 42% of all personal bankruptcies are a result of medical expenses. The study also reveals that 78% of those who filed had insurance.
Job Loss (22%)
Millions of Americans are unemployed, which makes them much more likely to file for bankruptcy. Unemployed individuals often pay for insurance out-of-pocket.
Uncontrolled Spending (15%)
Credit card bills, large mortgages, and expensive car payments contribute to bankruptcy.
Uncontrolled spending habits can put Americans on a path to filing.
Legal fees, child support, alimony and the burden of providing for a household on one income can result in ample financial stress. Divorce rates are nearly 50% in America.
Unexpected Disaster (7%)
Unexpected disasters such as earthquakes, floods, or hurricanes can be nearly impossible to prepare for. If a homeowner is without insurance, this can possibly lead to bankruptcy.
Avoiding Foreclosure (1.5%)
An individual can spend a life time preparing to purchase a home. Just to avoid foreclosure, some Americans will file for bankruptcy to re-organize debt.
Poor Financial Planning (1.5%)
Not having a sound financial plan can lead to bankruptcy. Financial experts recommend establishing savings for expenses that could lead to debt.
Preventing Loss of Utilities (1%)
Along with home foreclosure is the risk of losing utilities. Keeping lights on and a house warm can be a factor for someone to file.
Student Loans (1%)
Student loans won't be eliminated like other unsecured debt, but it may be possible to consolidate student loans with a bankruptcy.
Preventing Repossession (1%)
If a creditor repossessed your vehicle, filing bankruptcy may force them to return the car, and any other personal property that may have been repossessed.