What Causes Bankruptcy: The Answer is Never Simple

There Are Many Reasons that People Need to File for Bankruptcy.

People file for bankruptcy for a variety of reasons. There is no single cause of bankruptcy, aside from general financial struggles. The path that led to those struggles and to someone ultimately determining that bankruptcy is the best option for them varies from person to person.

The truth is the myths out there about people who file for bankruptcy – laziness, irresponsible choices, foolish money management, etc. – are more often than not false. But these myths hurt those who could benefit from filing.

Understanding the true causes of bankruptcy and knowing that more often than not a person’s financial struggles were unavoidable can make filing seem like a more viable option.

Are People Who File for Bankruptcy Irresponsible?

The simplest answer to this question is “sometimes.” There are people out there who mismanage their money and make irresponsible decisions. This doesn’t make them bad people, it just makes them people who made mistakes. And we all make mistakes. Some people who file for bankruptcy make mistakes related to money.

But in other cases, most cases even, people filing for bankruptcy were not irresponsible. They’ve encountered unexpected expenses and life emergencies. They made the best possible choices they could with their finances, but life threw curveballs at them. They were not careless with their money and they did not overspend, they simply experienced unexpected challenges.

Mindless spending is rarely the cause of bankruptcy, despite many people thinking it is the primary cause. Unfortunately, this misconception leads to people not filing for bankruptcy because they don’t want to feel bad or look foolish.

In reality, the most common causes of bankruptcy are linked to job loss, medical emergencies, business failures, and divorce. Every single person is at risk for at least one of these life experiences and none of them can say they are fully prepared for the challenges they might bring.

For many, those challenges could be financial.

When Good Choices Go Bad

In some cases, people end up having to file for bankruptcy because they followed financial advice that has long been considered sound. They not only weren’t making irresponsible financial decisions, they were doing exactly what the general public believed to be the right thing.

For example?

• They decided to attend college and took on student loan debt to do so.
• They bought a home and took on mortgage payments.
• They launched a business hoping to provide jobs to people in their community.
• They invited extended family members to move in with them because those people were experiencing hardship.

These are just a few of the seemingly “smart” decisions people can make in life that lead them down the road to bankruptcy. They’ve done everything they can, and more, to be responsible and do right by themselves and their families, only to find themselves in debt.

The bottom line?

Nobody should feel guilty or as if they’ve screwed up because they are considering bankruptcy. The causes of bankruptcy are complex and everyone’s situation is different. Life is all about dealing with the unexpected and for many, the best way to deal with it is to file for bankruptcy and make a fresh financial start.

To learn more about what causes people to file for bankruptcy, check out this article from Forbes.com.

If you’re struggling with your current financial situation and you think bankruptcy might be a solution, we can help. Contact the Law Office of Robert M. Geller at 813-254-5696 to learn more.