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The 4 most common causes of personal bankruptcy

No one is exempt from losing a job, developing a medical condition that requires serious care or getting a costly divorce. Unfortunately, many people find themselves in situations that cause debt to rise even as they cannot pay it down. Spending irresponsibly is not the only reason that people get in over their heads with debt. Bankruptcy can be a valuable option on the way to a fresh financial start, and you may need to consider it if you are dealing with any of the following.

1. High medical bills

Statistics show that even those with health insurance often have a hard time paying their medical bills. High medical costs are the number one reason that people file for bankruptcy in the United States. As you cannot control when an injury or illness hits, it is often difficult to get the treatment you need without going into debt.

2. Unexpected layoff or job loss

You may be great at your job, but if the company is forced to cut back and lay off employees, you could face the reality of a life with no income for several months. When this happens, many Americans find they do not have sufficient savings to tide them over until they get a new job, and they may lean on credit cards to pay their bills, leading to overwhelming debt. With the loss of a job often comes the loss of health insurance, which exacerbates the problem by increasing costs for health care.

3. Excessive use of credit

Credit cards are a tempting way to pay for things, as they offer you the option to buy now and pay later. When car loans, installment debt and credit card bills spiral out of control, bankruptcy may be the only option to alleviate the stress and worry that comes with debt. If you have excessive credit card debt and are unable to borrow the money from family or friends or work out a debt consolidation plan, you may need to turn to bankruptcy.

4. Separation or end of marriage

Divorce is not just hard on your emotional and mental health, but it can also be hard on your wallet. Not only do you now have to maintain a household on one income, but even the costs associated with the divorce can create suffocating debt. Add in child support, alimony and any other expenses you deal with, and it is often impossible to keep up.

Is bankruptcy the right choice?

Filing for bankruptcy is a big choice and not something you should take lightly. If you are considering this as an option to get a fresh start, we encourage you to consult with an attorney today.

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