Most people who make the difficult decision to file for bankruptcy protection do so for a variety of reasons. While making sound financial decisions certainly helps people avoid bankruptcy, there are instances in which people go bankrupt through no fault of their own. Here is a look at four of the most common reasons that people file for bankruptcy protection in Florida.
Loss of income
According to a study published in early 2019, 59% of Americans live paycheck to paycheck. With that in mind, losing a job creates a financial emergency for millions of people across the country. Even more tragically, since most Americans don’t have access to emergency savings, the need for bankruptcy protection often comes about quickly.
In some cases, medical emergencies can lead to the loss of a job, meaning that those two factors may go together. Since most insured Americans rely on their employers for their insurance coverage, the loss of a job also leads to the loss of health insurance. As the cost of medical care continues to rise, the number of Americans that face bankruptcy because of medical emergencies will increase.
Poor financial decisions
While some of the bankruptcy factors discussed on this list are unavoidable, some people face bankruptcy because of their own poor financial choices. Many of the people who file for bankruptcy do so because they max out credit cards in an effort to live beyond their means. Creating and sticking to a budget is the best way to avoid overspending.
Mortgages are the most common type of debt among Americans. Unfortunately, job losses, personal emergencies, and other situations often make it impossible for borrowers to pay their monthly mortgage payments. While some mortgages offer adjustable rates and refinancing options, many people file for bankruptcy protection because they have no other choice following a foreclosure.
While some forms of bankruptcy protection provide people with the chance to start afresh with their finances, there are downsides to consider. Bankruptcies remain on your credit report for up to seven years, meaning you should try to avoid bankruptcy if possible.