Past Due NoticesThere are many stereotypes surrounding bankruptcy. While many people go bankrupt simply because they have mismanaged their money or spending, there are even more perfectly responsible people who are forced into bankruptcy due to circumstances beyond their control. A shaky economy means that more people are in danger of bankruptcy than ever before. It can be helpful to understand the truth about why people go bankrupt and why contacting a chapter 7 bankruptcy lawyer is important.

Out-of-Control Medical Expenses

Despite the adoption of the Affordable Care Act, healthcare remains the number one cause of bankruptcy, accounting for about 62 percent of all individual bankruptcies. This is usually due to unexpected injuries, illnesses, or the development of a chronic illness that send healthcare costs skyrocketing.

Many people who go bankrupt due to medical expenses have health insurance, which means that insurance does not always protect them against bankruptcy. There are many possible reasons for this. A person may not be able to afford an increase in premiums. They also may have chosen a plan with a high deductible that they cannot afford to pay.

Job Loss and Unemployment

While there are some protections for employees who have been fired or laid off, a job loss still represents a leading cause of bankruptcy. This is often due to a combination of factors that rapidly destroy personal finances and savings. Not only does the person lose their income source, but they often lose other vital benefits such as health insurance that increase their regular living expenses. Employers are increasingly resistant to paying unemployment benefits, and in a tight economy many employees cannot quickly find sufficient work.


A divorce or separation is often a massive drain in finances. Not only are many divorce proceedings expensive, the loss of a partner’s income and support and the forced sale of marital assets often leaves one or both former spouses at risk for bankruptcy. Even if a spouse manages to survive the legal fees of the divorce, the continued costs and wage garnishments of child support or alimony often push them over the edge.

Poor Use of Credit

A misunderstanding or misuse of credit often lands people in financial trouble. This is especially true of young people who may not have a good understanding of how credit works and who may have made some poor financial decisions. Others may be forced to use credit due to separate financial problems or job loss, and the rising credit usage then compounds their financial problems.

Filing for bankruptcy is often the only way to get out from under crippling debt and get a fresh financial start. While there are many consequences to bankruptcy, a chapter 7 bankruptcy lawyer may be able to help you understand its benefits.