1.5 million people file bankruptcy annually in the United States. Studies have recently been performed to uncover the primary reasons why people end up filing for bankruptcy.
The most common reason for filing bankruptcy is medical expense. Medical costs are exceptionally high in our nation, and, as a result, many individuals are carrying tens of thousands of dollars in medical debt that they just cannot pay back. 78% of those who file bankruptcy for this reason have medical insurance, but clearly it did not cover enough.
The loss of employment is a serious problem in recent times. 22% of those who file for bankruptcy cite job loss as the reason for their filing. And while those individuals may not have been able to prevent their predicament, another 15% of individuals who file due to uncontrolled spending certainly could have. Excessively large mortgages, expensive car payments, and other excesses lead to bankruptcy for many Americans.
8% of Americans file for bankruptcy due to divorce. The financial situation of individuals changes drastically when households divide, especially when children are involved. 7% of bankruptcy filers claim unexpected disaster is the reason. Uninsured individuals faced with a flood or other catastrophe can lose their ability to pay their debts.
Other reasons for bankruptcy include avoiding foreclosure (1.5%), poor financial planning (also 1.5%), student loans (1%), preventing loss of utilities (1%), and preventing repossession (1%). Bankruptcy filings have been more frequent in the recent economic recession, but it is hoped that as the nation stabilizes, individuals will be able to keep up with life expenses.