The 10 Most Common Reasons People File for Bankruptcy - Cibik & Cataldo



By:Michael A. Cibik

Bankruptcy is nothing to be ashamed of. Many people find themselves on the brink of bankruptcy through no fault of their own. Bankruptcy can affect any person regardless of age, race, education level, and background. You are not alone – many people have been in your shoes and gotten a fresh start. Here are the top 10 reasons why people file for bankruptcy.

Job Loss

When a person loses their job unexpectedly, they take on additional expenses that they didn’t have to worry about before. Even with a comfortable savings account or hefty severance package, unemployment makes things like healthcare and emergency expenses, such as car troubles, even more pricey.

Income Shortage

Even if a person doesn’t lose their job, companies are always looking to cut back on unnecessary expenses. This could mean significant pay decreases and loss of bonuses at the drop of a hat. Employees may resort to dipping into savings accounts or credit cards to make ends meet, but these safety nets can only supplement one’s lifestyle for so long before they are in over their heads.


Poor budgeting, a lack of financial discipline, and spending money that someone doesn’t have, especially on credit cards with high-interest rates, are easy ways to accumulate crippling debt that is difficult to recover from.


To avoid foreclosing on their homes, many Americans have no choice but to file for bankruptcy. When a person has to choose between losing their house or going bankrupt, the choice becomes clear, even if it’s not ideal. Financial burdens are stressful enough without the threat of having your house taken from you.

Utility Costs

Keeping a home warm in the winter and cool in the summer is not cheap. Whether a person rents or owns their home, the expenses that come with heating, air conditioning, and electricity often complicate a person’s finances.


Marital separations are one of the leading causes of personal bankruptcy. Divorce can create tremendous financial burdens on both parties, even if the divorce is agreed upon. Between legal fees, dividing assets, child support, alimony, providing for two households instead of one, and any debt that one might become responsible for through their spouse, it’s no wonder why divorce is one of the top reasons people file for bankruptcy.

Unexpected Expenses

Sometimes, life just happens. When it hits you hard, you may not be as prepared as you think you are. Whether someone’s property is burglarized, their car suddenly has complications, or a natural disaster hits their home, unfortunate events happen every day that could suddenly cost a person thousands of dollars.

Credit Debt

Credit cards and personal loans may seem like quick fixes for piling bills and unforeseen expenses, but they prove to be slippery slopes for many Americans. Uncontrolled credit card spending, car installments, and other personal loans are quick avenues into debt that are difficult to recover from. Even if one’s credit card debt isn’t a result of a lack of self-control, but rather from unfortunate circumstances like a job termination, falling too far behind on minimum monthly payments is a sure-fire way to file for bankruptcy. Likewise, home-equity loans can sometimes help keep creditors at bay, however, if these payments go unpaid, they could result in having to foreclose on one’s home.

Student Loans

It’s estimated that 1 percent of all US bankruptcies, or about 15,000 a year, are a result of student debt. While it’s certainly common for people to have some student loan debt in their name even years after graduating, failing to pay it off as quickly as possible can have serious consequences on your financial well-being.

Medical Expenses

Even if a person has great health insurance, a serious illness or injury can easily leave them with a bill totaling hundreds of thousands of dollars in bills. An unexpected diagnosis is the fastest way to clean out retirement, college, and savings accounts and still leave collectors searching for more. The result? Unavoidable bankruptcy.

If you have found yourself in over your head in debt caused by life’s unfortunate circumstances, you are not alone. The trusted bankruptcy lawyers at Cibik & Cataldo have been providing superior, cost-efficient, and value-oriented bankruptcy legal services for over 35 years. Proudly serving the Philadelphia and surrounding areas, our legal team is committed to helping you make well-informed decisions on all of your bankruptcy matters. Contact us today to regain your financial freedom as quickly as possible!


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