While financial irresponsibility does contribute to a number of bankruptcies, more Americans are finding themselves forced into bankruptcy by unanticipated situations. Last week, we wrote an article concerning how medical debt is a major factor in the majority of bankruptcies filed in the U.S. However, it isn’t the only reason why Americans file for bankruptcy. Often, there are a number of contributing factors. In this article, the Danville, IN bankruptcy attorney, Chris Arrington, will discuss the leading reasons forcing Americans to file for bankruptcy.

Loss of income

Most Americans rely on a stable income in order to pay for things like car loans and mortgages. They take out these loans based on the belief that they will be able to pay them for the foreseeable future. When they lose their job and can’t readily replace it, they often fall behind on their payments. In addition, many Americans will rely on credit during periods when they have little or no income. This leads to a situation where they not only cannot pay their existing debts but they incur new ones. In some cases, bankruptcy remains the only solution to their problem.

Medical bills

Medical expenses are another major factor that contributes to bankruptcy in America. We previously wrote about this in last week’s blog post. 66.5% of all bankruptcy filings include some form of medical debt. Often, this debt is hidden on credit cards that were used to pay off hospitals. In addition, many people are not bringing in any income while they’re dealing with medical problems.

While there are several programs intended to ensure those who lose their jobs retain their health insurance, these programs often require the employee to pay both their share and their employer’s share of the premiums making it unaffordable to many. 

Unaffordable mortgages

Mortgages typically account for the largest portion of household debt in America. These include both mortgages and home-equity lines of credit. Together, they account for 72% of household debt in the United States. In some cases, lenders will approve a buyer for a larger loan than they can reasonably afford. Those who accept such loans are at risk of losing their homes and incurring substantial debts if they cannot afford to make payments. 

Providing financial assistance to loved ones

Another reason that Americans file for bankruptcy is providing financial assistance to loved ones. In some cases, a relative requires financial help and another family member steps in to loan money. The relative never pays the money back and now, they can no longer afford their own expenses.

Overspending

Not everyone is financially savvy. Some people attempt to live beyond their means. This can result in incurring debt that they cannot reasonably afford to pay back. If a borrower maxes out their credit cards and cannot make the minimum monthly payment, the debt can quickly become overwhelming. 

Talk to a Danville, IN, Bankruptcy Lawyer Today

Are you in financial trouble? The Indiana bankruptcy attorney, Chris Arrington, can help. Call our office today to schedule a free consultation and learn more about how we can help.