There are many reasons why people file for bankruptcy; however, certain reasons are more common than others. Let’s look at some of the top reasons that drive people into filing for bankruptcy.

One of the biggest reasons for bankruptcy is unpaid medical bills. If you or someone in your family experiences an unexpected illness or injury, you may acquire large medical or hospital bills. Paying off these bills can be challenging and you may be forced to consider bankruptcy. Health problems can be frustrating, and the additional debt required to solve medical problems can make the situation even worse.

Another common reason for bankruptcy is job loss or unemployment. Many people who have well paying jobs buy homes and cars and get accustomed to a certain quality of life. If you are fired or laid-off, your bills will begin piling up, and you may start receiving threatening calls from creditors and bill collectors. Extended unemployment due to health problems, lack of work in your field, or other circumstances, can also lead to bankruptcy. To make matters worse, many people who lost their job may be forced to take a job that pays less than their previous job. This can make repaying debt obligations even harder.

Another common reason for bankruptcy is divorce or separation. Divorce can strip you of your assets, reduce your disposable income, and create an increasing debt burden. Divorce is very costly and what’s even worse is that you could end up owing portions of your spouse’s debt – even ones you didn’t know about. If your spouse files for bankruptcy or has uncollectable debt, your spouse’s creditors can try to collect the unpaid debt from you (especially if the divorce is not yet finalized). Combine divorce with health problems, job loss, and unpaid medical bills and the situation rapidly spirals out of control. If you are unemployed after a divorce, you may have to acquire even more debt in order to get a car and a place to live after an unexpected separation.

With the economy in its current state, it will not surprise you to discover that another common bankruptcy motivator is a failed small business venture. Many people have great business ideas every day and in the right economic conditions some of those businesses enjoy a long, fruitful existence. The sad fact is, however, that business conditions these days are not very good for most types of business, and more small businesses fall apart than succeed. If your small business has had to close, there is a good chance that you still have loans or leases that you personally guaranteed and are responsible for. Although each situation is unique, there is a good chance that those personal guarantees can be wiped out through bankruptcy.