Loss of income is the leading cause of bankruptcy filings in the United States, according to a recent study. Nearly 78% of respondents cited this as the primary reason for filing for bankruptcy. This is unsurprising, as most people rely on their job to pay their bills. If these results are extrapolated across the country, it is estimated that 326441 bankruptcies last year were due to an illness or injury of the filer or a family member, and another 267,575 people had significant medical bills, although other reasons were also mentioned or no reason was given.
In addition to serious illnesses or injuries, job loss or divorce are also frequent causes of bankruptcy. The rate of personal bankruptcy filings has seen a dramatic increase over the past 25 years. The primary cause of bankruptcy is an unexpected decrease in income. However, over the past century, economic, legal and institutional factors have likely contributed to the pattern of bankruptcy rates.
These include increased consumer debt, reduced savings, reduced costs of filing for bankruptcy and greater access to credit. The Bankruptcy Act of 1898 was the first permanent bankruptcy law in the United States and was passed in response to the rise in personal bankruptcies during the 1960s. This law made it easier for both businesses and individuals to file for bankruptcy. The Community Reinvestment Act (CRA) was enacted in 1977 and has had a significant impact on bankruptcies.
According to a recent study, medical bills account for around 40% of all bankruptcy applications last year. The Bankruptcy Act of 1898 was established by the Bankruptcy Act of 1898 and increased federal exemptions for personal property, which encouraged bankruptcy. A study on a subsample of adults without health insurance revealed that hospitalizations are responsible for only 6% of bankruptcies; however, this effect is higher than that of the general population due to a lower hospitalization rate. Policy makers' beliefs about medical bankruptcies are mainly based on two high-profile articles which state that medical events cause approximately 60% of all bankruptcies in the United States.
The figure shows personal bankruptcy filings per 1,000 people in the United States from 1900 to 2004.These factors such as increased availability of credit, reduced costs of filing for bankruptcy and decreased consumer savings have not been the main cause of most bankruptcies but have made people more vulnerable to negative income crises and thus more likely to file for bankruptcy. The US bankruptcy code is extremely complex and most people need a trained legal professional to help them navigate it.