5 reasons people declare consumer bankruptcy

The number of bankruptcies that take place in America is alarming. According to the United States Courts, nearly 13 million Americans declared consumer bankruptcy from 2005 to 2017. The fact that so many people cannot pay off their debts is alarming. 

It is important to understand the reasons why millions of people file for personal bankruptcy. Here are some key causes of consumer bankruptcy in the United States.

1. Credit card debt

Debt that accumulates via credit cards can be uncontrollable. The risk of obtaining massive credit debt is higher with creditors who charge significant interest rates. The reasons people build up credit card debt range from irresponsible spending to financial catastrophes.

2. Job loss

Losing a job can easily cause someone to declare bankruptcy, especially if he or she does not have an emergency fund to cover living expenses. Sudden job terminations and layoffs can make it difficult to cover food, rent or a mortgage, insurance, transportation and utilities. 

3. Medical costs

Sudden injuries and illnesses can be financially devastating. When someone receives news that he or she requires a major surgery or costly medication, it is often non-negotiable. Life-saving medical treatment can be too much to afford. When medical bills are too steep, sometimes bankruptcy is the only viable option.

4. Divorce

Ending a marriage is not only fraught with emotions, but it often has significant financial implications for one or both partners. Splitting income and assets, paying legal fees and covering child support or alimony payments can be too much to handle.

5. The threat of foreclosure

When people fall behind on their mortgages, there are not many places to turn. The possibility of losing a home causes many to declare bankruptcy. Filing for bankruptcy can save homes and prevent foreclosure.

This is a small list of a multitude of reasons people file for bankruptcy. No matter how consumers end up in financial calamity, they should consider bankruptcy as a sensible solution to debt. 

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