If you are living paycheck to paycheck and dealing with credit card debt, you might be just a hefty car repair bill away from having to file for bankruptcy.
However, what if you have some decent savings, say, $5,000, and are able to keep your debts in check? There is no way you would have to deal with bankruptcy in the next year, right? Hopefully not, but many people have learned otherwise.
Nature of the system
There is a lack of safety nets in the United States. For example, if you sustain an injury in a car accident and are unable to work, that $5,000 in savings goes away fast. Add the fact that your health insurance likely does not cover all of the bills, and compensation for the accident may take a long time to get, if it is even possible at all. Your medical bills could end up being prohibitive. This could be true even if your savings were $20,000 or $30,000 instead of $5,000. You see all of these people online who have to crowdfund to help pay for their medical bills or their loved ones' bills--people you never thought would have to ask for money.
Replace "car accident" with other scenarios such as job loss, family emergency, serious illness or identity theft, and you begin to see why so many people are forced into bankruptcy after one major life change. It is one reason why bankruptcy does not deserve to have the stigma that it does. Plenty of decent and hardworking people have to file for it through no fault of their own. Even the folks who make unwise spending choices and who find themselves getting deeper and deeper into debt may have been prey to unscrupulous creditors making false promises.
Bankruptcy is possible because the lack of safety nets is obvious. People deserve to have fresh starts after being in a hard place financially, no matter how they got there.