Each year roughly 1 million cases are filed in bankruptcy court. During
2012 it was estimated that hundreds of thousands of petitions filed included
foreclosure, but this wasn’t the prime reason why many filed. A recent study took
a look at why many cases were filed that year, with some surprising results.
While many households have issues related to medical needs, job loss,
changes in income, and cleaning out personal savings to help with debt
obligations, common reasons for filing may not be what you think.
Reasons why personal bankruptcy is filed:
- Getting rid of debt collectors and debt buyers. A study completed by the Center for Consumer Recovery (CCR) showed roughly
74 percent of cases filed in 2012 debtors had debts from debt buyers:
a third-party collector. They are not the same as debt collectors, which
accounted for roughly 24 percent of cases filed the same year. A debt
buyer may buy debt from a collector or creditor at pennies on the dollar.
- Eliminating credit card debt. Americans filing for protection often have the most credit card debt
in this category with studies showing about 72 percent of filings in 2012
had this type of debt.
Medical bills were second at 21 percent.
- Lawsuits and litigation. Being sued is another reason why many debtors seek protection. When studies
were conducted in 2012 by the CCR, they asked over 3,000 people that filed
bankruptcy with many saying when they learned about pending legal action
against them it was the last straw. Just 4 percent of debtors say they
filed because they were overwhelmed with debt obligations.