Many people may believe that bankruptcy usually occurs because of excessive spending and financial mismanagement, but this could not be further from the truth. The vast majority of bankruptcy petitioners are financially responsible people who find themselves in a financial bind after a run of bad luck that could have happened to anyone.
Medical bills and consumer bankruptcy
A recent analysis of census data, court filings and federal statistics found that medical bills were the leading cause of consumer bankruptcy in the United States. The study, conducted by NerdWallet Health and reported on CNBC, estimated that 646,812 people filed or will file for bankruptcy in 2013 because of medical expenses. This means that medical expenses alone are expected to account for nearly 40 percent of the 1.7 million consumer bankruptcies this year. This is not a new phenomenon. In 2007, a Harvard study found that medical expenses led to 62 percent of U.S. personal bankruptcies.
Other causes of bankruptcy
There are numerous other life events that drive responsible people into bankruptcy. Like medical expenses, these difficulties can materialize with little or no warning and quickly disrupt a household that was financially stable. Causes include:
- Divorce
- Legal fees for criminal defense
- Civil liability not covered by insurance
- Job loss
- Tax debt
While budgeting and saving can provide a cushion and make bankruptcy less likely, there is nothing the typical household can do to protect against every financial shortcoming. Many people who find themselves filing for bankruptcy could not have taken any reasonable action to avoid it.
For people whose financial situations have been compromised because of unexpected expenses or losses of income, there is no shame in considering bankruptcy. The Law Office of David A. Fernandez, P.C. has helped people throughout the Houston area navigate the bankruptcy process and regain control of their finances.
