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In a basic sense, we understand that most causes of bankruptcy boil down to spending more money than one brings in, thus creating a financial squeeze that, over time, leads to missed payments and piling debts. This simplification, however, doesn’t truly show the complicated, preceding factors that can slowly drive an individual to the point of bankruptcy, so today, we’re going to take a more detailed look at the most common life events that can lead to a bankruptcy in America.

Medical Issues

We’re addressing this item first, because, far and away, medical expenses are the most common cause for bankruptcies in the United States. 

According to at least one Harvard University study, about 62 percent of personal bankruptcies in the country are on account of medical debts, and, what’s more, the vast majority of those bankruptcies were from people who were insured. 

In addition to the high costs of medical care driving people into bankruptcy, having a medical emergency and not being able to work long-term afterwards can quickly wipe out savings and place people in situations where they cannot meet their financial obligations.

Loss Of Employment

It’s not just medical emergencies that can drive an individual to unemployment. There’s a whole host of reasons—ranging from layoffs to plain-old termination—that can see an individual left without a steady source of income. Once that happens, and without a substantial emergency fund to coast on, many Americans find themselves in over their heads with few alternatives.

And it’s important to bear in mind that the loss of a job doesn’t just cut a person’s income—it can also increase their expenses. If they’re dependent on their job for health insurance, this is another item they’ll have to start coming out of pocket for, to their great detriment.


Imagine your family is pulling in two incomes, and then, suddenly, you have to make everything work on one. This is the bane of many divorcees, as they attempt to navigate this unexpected change to their finances. Divorce can mean taking on portions of a partner’s debt, in some situations, and can also come with hefty court fees on top of the loss of assets and income.

Poor Credit Usage

Used recklessly or without forethought, credit debits can pile up quickly and cause an individual to turn to bankruptcy as an alternative. 

This is an important argument for controlling personal spending and being responsible with your credit, but it’s also important to note that not all credit woes are borne of irresponsibility. Sometimes, it just takes an unexpected life event or two to push a person into a situation where credit debts pile up out of seeming necessity. Speaking of which…

Unexpected Emergencies

We mentioned suddenly losing a job, medical expenses, and divorce as big causes of bankruptcy already, but there are also unexpected accidents of a different type that can suddenly change an individual’s fortunes, such as storms, natural disasters, and other such unpredictable events that can wreck entire homes. 

When this happens, and individuals aren’t insured against such peril (or insurance doesn’t want to cover them) it can lead to mounting expenses that an individual simply can’t overcome. Thus, bankruptcy may be their only alternative for getting debts back under control.