Common Causes of People Going into Debt

The best way to stay out of debt is to earn more than you spend. However, that is easier said than done.

Even when you’re doing well financially, anything can happen at any time, causing you to experience financial distress. Many people are able to make more money and get out of debt quickly before it escalates. On the other hand, many are not so lucky. They quickly end up with tens of thousands of dollars in debt. Their car may be repossessed. Their home may go into foreclosure.

Debt is also like an epidemic in the United States. Those who live in the 50 largest cities in the country have an average debt of $37,800. That’s more than some people make in an entire year.

Debt can lead to bankruptcy. If you want to avoid having to file for bankruptcy, you’ll want to understand why people go into debt. Here are some common causes.

Low Income

Having a job is not enough for many people. They earn minimum wage or not much above it, which is still low income. The lowest minimum wage is in Georgia and Wyoming ($5.15 an hour), while the highest is in Washington, D.C., at $17.50 an hour. Even when a person works full time, they cannot earn enough money to pay their bills. This can leave them vulnerable to unexpected expenses that can cause them to spiral into debt.

Medical Debt

Statistics say that 1 in 5 households in the United States have medical debt. Collections appear on 43 million credit reports. Many Americans have anxiety over health care costs, especially the younger generations. Studies show that 67% of those in Gen Z and 62% of millennials avoid seeking medical care due to the cost.

Child Care

Having children is expensive. In some cases, daycare is more expensive than rent. Prices depend on age and location. The average cost of full-time center-based childcare for two children (an infant and a 4-year-old) is $2,182 per month.

Divorce

Major life changes like divorce can also trigger debt. With the average divorce costing more than $15,000, legal fees, child support, and alimony can strain finances. So can shifting from a dual income to a single income household.

Student Loans

Many people have tens of thousands of dollars in student loan debt that they are not paying. About 20% of people are not making payments. While most cannot afford to do so, many are purposely holding out and waiting for loan forgiveness from the government.

Contact Us Today

Little money and a lot of bills are a recipe for debt. Debt can quickly grow, making it harder to pay down.

When debt grows too large to control, you need to understand your options. South Florida bankruptcy attorney Brian K. McMahon, P.A. can help you get the fresh start you need.

Call (561) 658-1789 or fill out the online form to schedule a consultation. We serve the West Palm Beach, Boca Raton, Port St. Lucie, and South Florida areas.