Many clients wonder whether they are the only ones facing the kind of financial hardships that lead people to file bankruptcy. That’s obviously not the case since millions of people file bankruptcy every year. But it’s good to know what causes most people to have to file bankruptcy. A study a few years ago by researchers at Harvard Law School looked at the causes of bankruptcy and found that more than two-thirds of debtors in bankruptcy had experienced a significant period of unemployment before filing bankruptcy. Half of all debtors had filed bankruptcy following serious health problems. This was especially true for people over 65 years old filing bankruptcy.
Another large portion of bankruptcy filings are by single women. The study found that a divorced woman is 300% more likely to find herself in bankruptcy than a married or single woman and a divorced woman raising children is even more likely to need to file bankruptcy.
The study also reported substantial financial problems for small business owners. Small business owners are three times more likely to file bankruptcy than someone who’s employed because the personal loan guarantees required of small business owners put them at risk when things turn sour.
This Harvard study points out that most bankruptcies have good reasons behind them and that the causes aren’t the fault of the debtors. Filing bankruptcy can provide relief from the debt burdens caused by unavoidable events.