Hundreds of thousands of people file for bankruptcy in America, each year, in which as reported by consumerreports.org, 1,536,799 filed for bankruptcy in 2010 and as of 2016 that numbered had dropped considerably to 770,846, which while those numbers are still staggering, the fact that so much improvement has occurred over the last six years is rather remarkable.
The two most prominent reasons why people go bankrupt are medical expenses and job loss, in which, during the recent economic expansion, job security has been improved, and the passage of the Affordable Care Act (ACA) in 2010, no doubt, was a very strong contributing factor to less bankruptcy filings, because medical expenses are typically very expensive, not budgeted for, and non-discretionary. The fact that the ACA provides subsidies for low-income tax payers along with providing coverage for pre-existing conditions, has undoubtedly helped to substantially reduce bankruptcy filings.
Still, the sheer numbers of people that choose to file bankruptcy each year, reflects that there are an incredible amount of people that have expenses that are so large and so unmanageable, that despite the fact that bankruptcy will not only cost them real money to file for and will effectively torpedo their credit rating for seven to ten years, depending upon the bankruptcy category that the file upon, they have little or no choice but to go ahead and do it anyway.
While bankruptcy will discharge debt, it will not discharge all debt, so that, by far, the most important debt categories to be discharge for nearly everyone is credit card debt and medical debt, whereas, the debt that cannot be discharged, unless under the most extraordinary circumstances is students loan debt, child support debt, and most tax debts, of which, these debts can be and often are extraordinarily high to begin with, yet American law will not discharge them from a given individual's responsibility.
This means that bankruptcy which is pictured by most as allowing individuals a fresh start, is in actuality for many people, not a complete discharge of all debt, and hence, not such a fresh start, after all, yet, hundreds of thousands of people file for bankruptcy each year, because their debt load is so high, and their ability to pay such debt appears well-nigh impossible, that they determine that their only prudent choice is basically to discharge as much debt as possible, in order to start over, to the degree that they can.
The fact that each year that hundreds of thousands of Americans find themselves having to declare bankruptcy is a true reflection of how many Americans are actually living on the edge of financial solvency, if even that, in which, when anything bad happens, such as a job loss, or overtime reduction, or incarceration, or unanticipated medical expenses, or the lack of a reliable vehicle, or garnishments, or credit card penalties and interest, or rent increases, or divorce, or reduced or eliminated government benefits, or tax offsets, as well as all other unforeseen expenses, places them into a hole so deep, that they cannot reasonably expect to recover from it.
This would indicate that the governmental safety net has massive holes in it, for the sheer quantities of numbers of actual bankruptcies, reflects that a significant portion of Americans, are getting sucked under each and every year, in this, the richest nation the world has ever known.