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Top 10 Reasons People File for Bankruptcy

Top 10 Reasons People File for BankruptcyIn 2023, the verdict is not out yet; however, we have some facts [real facts].  The premise is always financial.  Many factors come into play – in personal lives, family, friends, neighbors, relationships, community, county, state, nation, the world, and more.  As times change, so do the circumstances of our lives.

When considering the top 10 reasons people file for bankruptcy, we look distantly upon the past and remember more clearly the most recent events.  The data we have today reflects information currently available.  The long term projections are yet to come.

U.S. Bankruptcy Statistics

Debt is often driven by recession.  During the Real Estate collapse from 2008 through 2013, over 1,000,000 Non-business bankruptcy filings [per year] were petitioned. Since then, bankruptcy filings have slightly decreased per year – down to 400,000 in 2021.

The economic stress caused by the pandemic resulted in record highs of job loss, negative GDP, and increasing medical crises.  It is also projected that bankruptcy will increase in 2023.    Just the Facts: Consumer Bankruptcy Trends, 2005-2021 | United States Courts (

Most cases of bankruptcy aren’t caused by reckless spending but by financial hardship, and many are lower-income individuals who simply can’t afford to deal with unexpected major expenses such as job loss or medical bills.  Peaks in bankruptcy petitions typically signify economic downturn; and states with fewer consumer-friendly laws typically see the most filings.   Bankruptcy Statistics up to 2023 – What You Need to Know (

Top 10 Reasons People File for Bankruptcy

“Generally, more than one factor will contribute to a situation that causes someone to file for bankruptcy”.

“Not everything that can be counted counts, and not everything that counts can be counted”.  – Albert Einstein

#1 World Economics – Considering the top 10 reasons people file for bankruptcy, a world of economics is always a factor.  To describe complex global systems affecting us would require a walk through history.  As we look back in time, crises are often revealed after transpiring.  Many bankruptcies are consequences of unforeseen events as a result of “the world we live in”.

#2 National Finances –  Parallel to world economics are the national financial decisions made in which the public is often unaware.  It is difficult to plan for the future or make adjustments in unforeseen circumstances.  Unfortunately, many suffer in the process.

#3 Loss of Income –  Recently, The U.S. Bankruptcy Courts reported that the pandemic resulted in record highs of job loss (see link above).  Prior to the pandemic, in 2019, a Charles Schwab Survey reported that 59% of Americans were living paycheck to paycheck.  Schwab Modern Wealth Index Survey 2019 | About Schwab

#4 Medical Crises – In late 2022, reported that 46% of bankruptcies now reported were medical related.  Medical issues can also lead to job and insurance loss.

#5 Real Estate Foreclosure – Home mortgages are typically the largest portion of household debt in the U.S. At the end of 2019, the Federal Reserve reported it is 70% of household debt.

#6 Natural Disasters – Unexpected disasters such as floods, tornadoes, hurricanes, and earthquakes can cause catastrophic damage to lives and property.

#7 Divorce – Can result in financial hardship for all family members including loss of property, legal expense, child support, and alimony.

#8 Late Life Crisis – The retired, aging, and elderly can increasingly suffer from the inability to perform normal basic life tasks, medical issues, and low income without necessary assistance.

#9 Loans – Vehicle payments and other misc. loans can be among the top 10 reasons people file for bankruptcy, also.  Although student loan debt is difficult to discharge in bankruptcy, many people might file for bankruptcy to eradicate other debt so they can afford their student loan payments.

 #10 Credit Crisis – Overspending on credit cards can lead to a bankruptcy for those who try to mitigate another financial crisis by using credit to survive.  Although, in recent news the U.S. Supreme Court ruled debtors cannot use the bankruptcy process in fraud used against themU.S. Supreme Court says bankruptcy can’t nix debts for others’ frauds | Reuters

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