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Reasons behind debt relief can be as unique as fingerprints

Although bankruptcy can often be one of the best choices to make when facing overwhelming debt, it is not necessarily a life-event that most people anticipate. So what is it that pushes people in Washington toward bankruptcy? As it turns out, there is no single reason that is the driving force behind the need to seek debt relief; rather, there are many complex factors that can influence a person's decision.

Medical debt, which we last discussed on Feb. 26, 2015 ("Bankruptcy often influenced by medical debt"), can play a heavy hand in loading on personal debt. According to Harvard University, roughly 60 percent of all bankruptcy filings cited medical debt as the main cause. Surprisingly, nearly three quarters of those filing because of medical debt had health insurance.

While medical bills are certainly a large player in the world of bankruptcy, student loans are also a serious contender. While only accounting for 1 percent of bankruptcy filings, students overwhelmed by debt result in 15,000 annual bankruptcies. For many people, the cost of a decent education can be a driver toward debt. The low number of filings is perhaps attributable to the fact that student loans are not typically dischargeable in bankruptcy under current law.

But what about people in Washington who play it safe, avoid extraneous debt and maybe even put a little aside for savings? Even these people are not immune to sudden and overwhelming debt. From a broken down car to necessary home repairs, unexpected expenses can quickly pile up, depleting any savings and pushing a person further and further into debt.

Unfortunately, there is a pervasive myth that people who file for bankruptcy do so because they were irresponsible with their finances. Quite often this is simply not the case. In the world of financial stability, it may only take a minor incident or a single extra bill to tip the scales against a person. When the calls from creditors turn sour and bills begin to pile up unpaid, debt relief may be one of the most appropriate courses of action for an individual to pursue.

Source: The Huffington Post, "Top 10 Reasons People Go Bankrupt", March 24, 2015

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