The number one reason for bankruptcies, according to the Administrative Office of the U.S. Courts, the total number of personal bankruptcies as of December 31, 2010 was 1,473,675.  This is an 8.1 percent increase over 2009 statistics.

A study done at Harvard University identified medical expenses as the number one cause of bankruptcy.  Medical expense represents that 62% of bankruptcy filings, and were the leading factor in personal bankruptcy.

What's interesting is that some 78% of those that listed bankruptcy had health insurance.

You might feel you're safe having health insurance, but the co-pays, deductibles and limitations of payout can wipe out even some of the most “perceived” safety nets.

The # 2 cause of bankruptcy was Job loss.  This is typically a result of layoff or termination.

Severance packages or payoffs are becoming less frequent these days.

With the shrinking savings accounts that most American's have, many are left in dire straights.

Those who are laid off or fired are left with a huge task of finding a job at the same pay scale as the one they were at.

Additionally, those who had insurance through their employer, which is most of them... had nowhere to turn, but Cobra, which is a highly inflated portion they had to pay to maintain the same coverage. 

With limited savings and nowhere to turn for a job paying anywhere near the same wage, many were left to make the decision to have a roof over their heads WITH utilities to warm their families and lights in order to complete their children's schoolwork... Many were left with no option.

Number 3 is is poor use of credit.  Most all of us have been there.  We work hard and always look towards that promotion or raise. 

Many turn towards credit cards as  a way of “buying some time”.  Keep in mind that that is that is all that a credit card is good for... they buy “time” to pay the bill.  Credit cards really don't buy anything.  Unfortunately, the “time” they buy comes with a price tag.

Sometimes 30 percent or more above the purchase price per year

The number 4 reason for bankruptcy  is a divorce or separation. 

With the divorce rate hovering around 50% no wonder bankruptcies has skyrocketed.

The cost of litigation alone is enough to force some to call it quits

Then comes the division of assets; the cost of day care; the tax bill; the  parents having to maintain separate parents having to pay for their own place... along with all the utilities.  Frankly, it shocked me that this wasn't number one.

Been there, Done that.  It's tough

For many, the cost of child support and the garnishments associated with it drive others into bankruptcy. 

Like it or not, many simply give up and not pay anything to the recipient.  The recipient is left with the responsibility of “doing it on their own” or incurring the legal fees associated with getting what their “entitled to”.  Often times, bills get so far behind that they can't catch up.

On the flip side of that is the person responsible for the payments has their wages garnished because of non-payment and is forced into bankruptcy.  Though this doesn't absolve them of their parental responsibilities, it can delay it to a point that that the recipient is unable to pay their bills and is forced into bankruptcy

Number 5 is “unexpected expenses”.  Theft, vandalism or lack of insurance for casualties, such as Earthquakes or Floods are uninsured can through people for a financial loop. 

Unexpected items that were not covered or deductibles can cause people to make the choice to either do without (which is often times not a possibility) or purchase new items on  credit, which they cannot afford

What's your recourse

Primarily, as hard as it may seem, is to establish SOME kind of savings account.

Seems simple enough, right

Take some of these things into consideration:

Cable is not necessary.  (The fees associated can be astronomical)

A cell phone is not necessarily a necessity (Take a look at your plan.  Do you really need the minutes/data associated with your plan?)

Put the money spent on that aside.

Going out or buying a pizza each week can be done without.  (Perhaps buying the ingredients for a pizza would be some bonding time with your kids)

Put the money spent on that aside.

Going out to a movie with the family can be turned into Monday movie night while watching a movie from Netflix.

Put the money spent on that aside.

Let me tell ya.  Kids spell love T I M E.  Spend time with your kids.  In time, it will mean MUCH more than any meal or items you can buy them.

Words of advice...

Respectfully,

Kevin Halper