• Sometimes bankruptcy is the only option.purse with one cent image by Oleg Kulakov from Fotolia.com
  
  American consumers rarely make financial moves that they hope will result in bankruptcy. In 2009 1,412,838 private individuals filed some form of bankruptcy, according to the U.S. Courts website. With hundreds of thousands of people declaring bankruptcy every year, it's helpful to know the reasons why people go bankrupt. If you know why bankruptcy happens, you may be better equipped to prevent it.
  
  

Improving Your Credit

• The common perception of bankruptcy is that it cripples your current credit score and eliminates your ability to get new credit for as long as the bankruptcy stays on your credit report. According to Smart Money, this would be the case if you had a great credit score right before you declared bankruptcy. The truth is that most people getting ready to declare bankruptcy have been doing damage to their credit score for years with late payments, charged-off accounts and negotiated pay-off amounts. Bankruptcy then becomes a way to stop the financial bleeding and allow the consumer to rebuild his credit. Smart Money even goes so far as to suggest that declaring bankruptcy, in some cases, can boost your credit score slightly.
  
  

Unplanned Expenses

• There are many different kinds of unplanned expenses that can drive someone to bankruptcy. According to Investopedia, sudden and significant medical expenses are one of those reasons. A prolonged illness that requires hospitalization and expensive treatment, that is not completely covered by insurance, can create debt that can only be solved by bankruptcy. Other unplanned expenses include significant damage due to a car accident or other kind of accident where you are found to be at fault and insurance does not cover it; loss of a home due to flood when the homeowner does not have flood insurance; and the need to take care of an ailing loved one who does not have health insurance.
  
  

Marriage

• Prior to commingling finances due to marriage, some people with severe financial problems decide to file bankruptcy before the wedding day. According to Bankrate, declaring bankruptcy prior to a marriage is a good idea if your soon-to-be spouse has good credit. Declaring bankruptcy before the marriage and keeping your finances separate will allow you to use your spouse's credit to make major purchases such as a home or car.
  
  

Bad Planning

• Investopedia points out that bad financial planning can also lead to bankruptcy. If you use credit cards and take on installment loans that put you beyond your means, that practice will catch up with you over time and cause you to consider bankruptcy. This situation can be made worse if you lose your job and cannot find a new one in a timely manner, or you new job requires you to take a cut in pay.