Multiple Bankruptcy Filings

A myth exists that states you can only file bankruptcy once in your life.  That is simply untrue and for good reason.  One may have multiple bankruptcy filings.  Bankruptcy is meant to allow the honest but unfortunate citizen a means of getting back on his or her feet.  This benefits the citizen, his or her family, and society as a whole.  The average person may go through multiple “bankruptcy-causing” events throughout his or her lifetime.

Bankruptcy-causing Events

When you think about consumer debt and bankruptcy, you might imagine some person who just goes on shopping sprees with no ability or intention of repaying the debt.  However, the real reason that most Americans end up filing bankruptcy has nothing to do with self-indulgence or an inability to resist temptation.

Medical Expenses

A Harvard University study indicates that unpaid medical bills are the leading cause of bankruptcy.  Rare or serious illness, catastrophic injuries – none of us are immune to these events.  Moreover, that study showed that 78% of filers actually had health insurance.  So this wasn’t a case of “well that person should have had insurance” – the majority of them did.  The unfortunate truth is that we all may be one accident or one illness away from bankruptcy.

Reduced Income or Job Loss

The Number Two spot goes to a decrease in income or loss of employment.  Companies now face a global economy with more and competition and automation.  That means they need to cut down on costs and, for many companies, the biggest expense line-item on their balance sheet is “payroll”.  Again, just like catastrophic medical events, you typically have no control over whether your employer is going to fire you.

Divorce

Generally, while you are married, you enjoy the benefits of what is referred to as “economies of scale”.  Simply put – you only need one roof over a married couple’s head – not two.  You only need to pay one cable bill, one electric bill, or one internet bill.  Once you split up and move into separate residences, those expenses typically double.  More specifically, divorce is expensive.  Divorce attorneys are expensive, trial is expensive and living off of one income where once there might have been two is expensive.  Many times, I see instances where couples get divorced and then each spouse files bankruptcy within a matter of months.  The burden is simply too much to handle without the contribution of the other spouse.

Multiple Bankruptcy Filings

Now circle back around to the beginning of this article.  How many co-workers, friends or family members do you know that have been affected by one or more of these life-changing events?  Moreover, life is usually not predictable or convenient.  You may lose your job this year, file bankruptcy and then end up getting divorced five years later.  You may encounter multiple catastrophic medical events throughout your life.  If you cannot afford to deal with the debt that results from each of these events, what else are you supposed to do?

Again, bankruptcy is for the honest but unfortunate citizen.  Sure, you hear ridiculous stories about how some random (nameless) person filed bankruptcy and got to keep a Rolex or a Rolls Royce.  Those stories are usually half-true and don’t really present all the facts necessary to truly understand how that conclusion was reached.  The majority of bankruptcy filings are done by hardworking Americans who just ran into some bad luck.  I know I’ve had some bad luck before – you probably have, too.  Don’t let it define you.