The statistics on bankruptcy is staggering. The last couple of decades have seen a phenomenal increase in the number of those unable to clear their debts. The Congress has recently taken up the matter so that it becomes more difficult to file for bankruptcy.

The recent spate of bankruptcies is due to many reasons.

First and foremost are medical costs. A Harvard study shows that this is biggest cause – 62% behind all personal bankruptcies. The irony is that 78% of those who had filed for bankruptcy were covered by some kind of medical insurance thus blotching the notion that medical bills impact only on those who are not insured. Some deadly diseases can wipe out savings and retirement dollars leaving one at the mercy of bankruptcy.

The second big cause for bankruptcy is loss of job – whether due to lay off, end of contract or resignation. The ultimate impact is loss of income. Few get severance packages but the majority is caught unawares with a pink slip being handed over. Without any emergency funds the victims finds no other alternative but to file for bankruptcy.

Illness and job loss are two things that are beyond one’s control – one being a hapless victim of fate and the socio-economic climate. But the third most important reason behind bankruptcy is poor use or excessive use of credit cards. There are many who cannot stop from spending. The credit culture has further nurtured this tendency. It became almost fashionable to be in debt. One gets ensnared in many types of debts making it impossible to tear free. If friends and relations fail to rally, if no more credit can be got, if the loans cannot be consolidated then the only way out is bankruptcy. There is statistical evidence that most of the debt consolidation programmes fail for many reasons. It only postpones the inevitable.
The breakdown of a marriage is also one of the prime causes for bankruptcy. Whether it is separation or divorce – the financial strain becomes often too much to cope with. There are legal expenses followed by slicing of assets between the sparring partners. Last but not least is the matter of child support. It all finally ends up in seeking bankruptcy protection for the victim unable to carry on with paying mortgage dues and live life.
Last but not least are unexpected expenses that pop due to various reasons – burglary, natural calamities like earthquakes, fire and floods. All these can lead to filing of bankruptcy.

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