People often wonder what the "typical" bankruptcy client looks like. I often answer that the "typical" client looks just like you. Many times, the only difference between the person I am speaking to and the client in my office is that the client in my office has been handed an unexpected life challenge.
This challenge could be any of the following: job loss, divorce, child birth, medical issues, and various other unforeseen obstacles. If any of those challenges present themselves in one's life, it often causes a spiral of debt to be incurred. Once the debt is incurred, it is very difficult to pay it off. It is the extraordinary situation that a person stumbles through a life difficult life event and then is able to make more money than before that event. Therefore, the very challenge that led to the debt, often leads to a reduction in earning potential as well. When the earning power is reduced, there is no "extra" money to pay down the debt and so it increases.
In a divorce, two incomes are reduced to one. Housing and food become a greater part of each person's budget because it can no longer be shared. Additionally, attorney fees and moving costs needed to be incurred just to physically and legally separate.
A new child often means expensive medical bills, another mouth to feed, more clothes to buy, and additional furniture. All of this needs to be purchased with a potential reduction in income as the mother needs to stop working to give birth and recover. Even if she goes back to work, there is no extra income available to her but a dramatic increase in expenses.
Other medical issues pose the same problem. When someone is hospitalized or has to take days off to get medical treatment, his employment is threatened. Even if he keeps his job, the person often does not get paid for that time at the hospital. In addition to not getting paid, the person often new medical bills. That missing income is supplemented with credit cards or loans. However, those loans will be hard to repay because the person is not making more money after getting sick and may even be forced to work less.
The one thing that I almost never see is a person who just racked up debt just for the fun of it.
This Atlantic article does a great job of showing how regular middle class people can find their way into debt and live on the edge of insolvency.
For many people, the necessity of filing a bankruptcy is only one life challenge away.