Is Bankruptcy Common
How common is bankruptcy? Bankruptcy filings are more common than you might think. A recent study looked at thousands of filings over a 6-year period and found some interesting bankruptcy filing patterns. Here is what the research found.
How Many People Have Filed for Bankruptcy?
From 2013 until 2019 approximately 1 in 10 consumers in the U.S. filed for bankruptcy according to Robert Lawless, Professor of Law at the University of Illinois in Urbana-Champaign. People turning to the bankruptcy system usually file after years of mounting debt they have been unable to resolve, despite their best efforts. While there is no “typical” person that declares bankruptcy, there are some overall patterns.
Who Is Most Likely to File?
The analysis of more than 5,000 bankruptcy filings suggests nine groupings of financial and household situations that are most common among bankruptcy filers:
- Car owners
- Black households
- Black women
- Single mothers
- The self-employed
- Property owners
- People with long-term debt
“Two of the bigger factors for bankruptcy were, as expected, homes and cars, because those are the two big-ticket items that consumers buy,” Lawless said. “The idea of filing for bankruptcy for those items is so you don’t lose them—so you’re not homeless or are unable to get to work. The current bankruptcy system gives people powerful, effective tools to do just that.”
It is important to note that a number of these categories are not necessarily exclusive of each other, they tend to overlap and intersect. For instance, women and African American households are overrepresented in the data as are black women and single mothers. These filers may be filing to protect their homes and cars as well as long-term debt. Consumer debt is not limited to one specific set of financial problems, it is typically spread over several monetary issues which continue to build up and worsen over time.
Professor Lawless and his co-authors at the Consumer Bankruptcy Project say their examination of the data indicates a need to overhaul our current bankruptcy guidelines and laws. The study reveals the current system is too broad and does not adequately address the complex problems currently facing American consumers. One improvement might be a move to more of an “À la carte” bankruptcy system, Lawless said.
At its core, filing for bankruptcy will help reduce, reorganize, or discharge debt, providing a better financial future for families. However, it is important to point out that it is not a magic bullet that will automatically solve all your financial worries. While the debt might be gone, the problems that created it in the first place may remain. Unexpected medical bills, the high cost of reliable childcare, inflation, our current COVID 19 related financial woes will still be there even after courts reduce, reorganize, or discharge your debts. People will still need to address their individual financial situations and habits to better secure a sound financial future.
If you are dealing with mounting debt and considering filing for bankruptcy, it is important to maximize asset protection. Developing a proper strategy can be difficult to properly prepare, determine, and implement. RJS LAW and its qualified attorneys are available to assist in understanding and completing the process as well as with determining a succinct filing timetable. Please call RJS LAW for a free confidential consultation and assessment at (619) 595-1655. You may also contact us via the web at https://www.RJSLawFirm.com. We look forward to hearing from you.