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What are the main reasons people file for bankruptcy?

Many people believe overspending is the main reason people overextend themselves and get into financial trouble. This oversimplification does not consider the sorts of events that can contribute to sudden economic problems. Knowing the leading reasons why people file for bankruptcy can help many Tennessee residents avoid these types of situations, as well as understanding that bankruptcy is a perfectly reasonable way out from under crushing debt.

Medical expenses are the main reason people file for bankruptcy, accounting for 62 percent of all personal bankruptcies filed across the country. Sadly, almost 80 percent of those who ended up filing for bankruptcy had health insurance, so medical costs clearly affect everyone and not just the uninsured. Serious or rare diseases and injuries are the most common of these events. Paying medical bills can easily wipe out savings and other available assets.

Job loss is another reason why people file for bankruptcy. Whether from termination, resignation or layoff, the loss of a stable source of income can send a person or household into sudden economic turmoil. Even if someone gets a severance package, it is rarely enough to stay out of trouble in the long run.

Poor credit use - out-of-control use of credit cards, loans and overspending - is another leading reason for a bankruptcy filing. Divorce or separation can also lead to trouble. Legal fees, asset division and spousal and child support can cripple someone's finances.

Finally, unexpected life changes can make for sudden trouble. Whether or not they are insured, Tennessee residents can see their financial circumstances change catastrophically by calamities such as floods, tornadoes or house fires.

Source: Forbes, "Top Five Reasons Why People Go Bankrupt," Mark Cussen, Mar. 3, 2010

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Kenneth C. Rannick, P.C.
4416 Brainerd Road
Chattanooga, TN 37411

Phone: 423-624-4002
Toll Free: 800-257-7594
Fax: 423-624-0509
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