There are numerous negative stereotypes about bankruptcy. For example, it is often seen as a sign of failure. However, many people face financial hardship for reasons beyond their control.
Bankruptcy isn’t always the result of poor financial planning or bad spending habits. It is often a last resort after an unexpected crisis.
Here are three common causes of bankruptcy where the filer is not to blame.
Sudden unemployment
Losing a job is one of the fastest ways to fall behind on bills. Even the most responsible person can struggle without a steady income. Severance pay and unemployment benefits may help in the short term, but they rarely cover everything.
If the job market is tough, it may take months to find another job. During this period, debt can quickly pile up, especially if you have a mortgage, car payments or dependents to support.
Property damage and loss
Hurricanes, wildfires and floods can leave people with thousands of dollars in property damage. Insurance doesn’t always cover the full cost of repairs or replacement.. If you lose your home or business in a natural disaster or accident, rebuilding from scratch can be expensive. In many cases, bankruptcy becomes the only way to regain some stability.
Helping family or friends
Sometimes, people end up in debt because they were trying to help someone else. Co-signing a loan, covering a loved one’s medical bills or lending money during a rough patch can backfire. If the other person can’t repay you, you’re left with the financial consequences.
Bankruptcy doesn’t always mean someone was reckless. If you’re facing financial pressure from circumstances outside your control, seeking legal guidance can help you get back on track.