In the US there are many reasons why we file for bankruptcy. I am going to cover the top five reasons why Americans file for bankruptcy.
5. Unexpected disasters – This could be due to an Earthquake, a Hurricane, other natural disasters, a death in the family, or some other unforeseen disaster. Unexpected disasters account for roughly 7% of US bankruptcies. This causes the most problems for those people who do not have adequate insurance.
4. Divorce – It is no secret that divorce is expensive. As former partner’s try to get by without each other’s financial support, while getting two household’s instead of two and usually racking up additional expenses along the way, it should be no surprise that roughly 8% of US bankruptcies are caused by divorce.
3. Out-of-Control Spending – Many people believe that reckless spending habits should not be rewarded by being forgiven the debt in court. As I am very frugally minded I tend to agree with this assessment for the most part. However there are some American’s that cannot pay for food, and are ill equipped to handle unexpected expenses like car repair. Often they turn to plastic to solve the problem. With high interest rates this leaves many consumers in poor financial shape. This accounts for roughly 15% of US bankruptcies.
2. Job Loss – In this down economy many people find themselves jobless, and responsible for a mortgage that they cannot pay. After the housing market collapse many construction workers and real estate employees filed for bankruptcies. These numbers have declined. Although the economy is picking up this still accounts for 22% of US bankruptcies.
1. Medical Expenses – According to a Harvard University Study as much as 62% of US bankruptcies were filed due to Medical Expenses. In 3 out of 4 of these cases, the person filing had insurance. They were just underinsured. Insurance may cover $100,000 dollars of a medical bill – but it may come with a $20,000 dollar Co-pay.
Being without insurance is a dangerous and risky proposition. Being under insured is just as dangerous. In these times at least it’s nice to know some companies out there try to prevent robbing you by keeping costs down.