While it is clear that people file personal bankruptcy to get out from under overwhelming debt, there are many roads which lead to that point. Everyone’s situation is unique, so it is impossible to pinpoint one reason that bankruptcy is prudent. However, there are 6 primary reasons that people find themselves in need of debt relief – it is likely that if you are considering Chapter 7 or Chapter 13 bankruptcy, one of these fits your situation.

Unemployment / Job Loss:

These days, a lot of people live paycheck to paycheck with little savings in the bank. When something unexpected happens, there simply is not a lot of safety zone between loss of income and bills that need to be paid. Job loss was a scary enough prospect in the past, but the uncertainty due to COVID has placed a lot more stress on people. Even the loss of one paycheck can put people in a place of financial instability, which can quickly become catastrophic.

Overuse of Credit:

While having your credit limit extended may seem like financial relief, it can cause big problems if not managed correctly. A line of credit or credit card should be used in cases of emergency, not for daily basics or worse – for luxurious expenditures you can’t actually afford. When job loss or financial crises do arise, many people find themselves needing their credit just to survive; which can often lead to needing to file bankruptcy once credit limits are reached and the income has not been replaced.

Unexpected Expenses:

When living paycheck to paycheck, even if there is no interruption in income, one unexpected expense can derail your finances. An expense could come in the form of a car accident or even just a needed repair around the house, such as your air conditioner failing. One of the most common unexpected expenses are medical emergencies.

Medical Emergencies:

Many people have decent health insurance, but unfortunately the current economy sees many without this important necessity. Even if you have health insurance, deductibles and copays in an unexpected situation can be overwhelming. Not only that, but in the case of an extended illness or a major surgery you can easily meet your limits and be left with large bills. Many people find that filing bankruptcy is the only way to cope with medical expenses.


The number one reason for divorce is financial lack or strife. Sadly, even if there is enough money, instability can occur after a divorce when assets are divided, or one party is expected to pay alimony or child support while still paying for all their other monthly expenses. In either scenario, it is common for individuals to file for bankruptcy before or after filing for divorce.

Negotiations Failed

You may have heard that many creditors will negotiate with those who are in trouble financially, and this is true. Often they may work out an alternative with you, but if they will not, you may find yourself in a tough situation. If you’ve tried everything in good faith, and it hasn’t worked, bankruptcy may be the only option.

Richard V. Ellis is a Sarasota bankruptcy attorney specializing in personal bankruptcy filings. If you are in financial hardship and are considering Chapter 13 or Chapter 7 bankruptcy, call today for more information.