What Causes Bankruptcy?

In a word, overspending.

A popular myth is that half of all bankruptcies are due to high medical bills, but at least one study shows this not to be the case. Nor is unemployment the primary cause.

Essentially, when people live beyond their means, it eventually catches up to them. Few people live beyond their means because of unavoidable problems like health concerns. For most, it's that big house, new car, plasma TV that gets them into trouble.

My parents called it too many Cokes, theorizing that if you throw money away on small items, it adds up to big bucks. That's about right, actually. According to the study cited, it's the accumulation of debt, not any one particular one, that gets consumers into the fix that leads to bankruptcy.