The Most Common Causes of Personal Bankruptcy

Recently, we looked at some of the most common causes of small business bankruptcy. Now, we will switch gears by looking at the most common causes of personal bankruptcy:

Medical Debt

Medical bills have overtaken mortgages as the number one cause of personal bankruptcy in the U.S. This financial nightmare is by no means limited to people with out health insurance. Each year, an estimated 10 million adults with health insurance coverage accumulate medical bills that they cannot pay.

Job Loss

With personal savings rates at all-time historical lows — which usually has less to do with undisciplined spending, and more to do with rising costs of gas, groceries, housing, insurance, and the list goes on — it is not surprising that losing a job is a major cause of personal bankruptcy.


Divorce can be enormously expensive to both parties; indeed, it has been said — even by attorneys — that the only people who benefit from a prolonged, acrimonious divorce are family lawyers who bill by the hour.
If you have minor children to support, it is important to remember that accrued child support payments will not be discharged per a personal bankruptcy filing. However, it still may be beneficial to file, since doing so would wipe out other debts (such as medical debt).
In addition, if your financial situation has materially worsened since divorce, you can file a motion with the family court (not the bankruptcy court) to modify your child support order. If accepted, your child support obligation going forward would be reduced to a more feasible level.

Credit Card Debt

While it is true that some people enter a downward financial spiral due to uncontrollable spending (i.e. they simply must get the latest iPhone or a new 4K TV, regardless of their budget limitations), many others are honestly the victims of difficult, unexpected circumstances.

For example, many of the people affected by 2017’s horrific floods in Texas and Florida had to pay thousands in out-of-pocket expenses for costs not covered by insurance or FEMA. Without personal savings or the option to borrow from family/friends, they were forced to take on massive credit card debt — not because they wanted to, but because they had to.

Student Loans

According to Forbes, combined student debt in the U.S. reached a staggering $1.7 trillion in 2017 — and the numbers are expected to climb well into the future.

Similar to child support obligations, filing for personal bankruptcy will not discharge student loan debt. However, it will free up disposal income by wiping out other debts. In addition, students who can provide evidence that they are experiencing “undue financial hardship” may petition to have their student loans discharged (this is a separate petition, and not part of a personal bankruptcy filing).

Learn More

If you are facing unsustainable and constantly growing debt, then contact the Law Office of Charles H. Huber today. We will give you the facts you need to make a smart, safe decision on whether filing for personal bankruptcy is in your best long-term interest. Our experience is your advantage!