Vance P. Truman, Attorney at Law
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Why do people go bankrupt? 5 major reasons

Naturally, bankruptcy can strike for many different reasons, and no two cases are exactly alike. That said, you can look at some of the main reasons for bankruptcy in an effort to understand the trends and the warning signs.

When you do this, you can identify five major reasons for bankruptcy. People often assume it's because those declaring bankruptcy are not good at managing their money, but it's usually much more complicated than that. Many of these reasons, as you will see, are completely out of your control. Five of the top reasons are:

  1. Losing your job. You could simply become a victim of downsizing when the company needs to cut costs.
  2. Getting divorced. Your spouse may file for divorce even though you want to stay married.
  3. Still facing debt when it's time to retire. Life is expensive, and you may not be able to pay everything off before your job ends.
  4. Seeing a reduction in income. Maybe you still have a job, but you're not bringing in as much money, so debt that was once affordable no longer is.
  5. Ending up with a lot of student debt. If you're still struggling with a lot of student debt in your 30s, you may regret the decisions that you made when you were just 18, and you felt like you had no other choice if you wanted to go to college.

No matter why it happens, you need to know how to approach bankruptcy, what legal steps to take, what options you have and how you can use this process to address your financial future.

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