One of the biggest challenges people face when considering bankruptcy is feeling alone. It can be easy to feel stigmatized or embarrassed, and you may think that people will believe you to be irresponsible. But bankruptcy statistics reveal a much different reality.
The statistics show that bankruptcy is far from an escape route for reckless spenders – only 5% of bankruptcies are attributed to irresponsible spending. Instead, bankruptcy helps those who suffer a job loss or unexpected illness; and is often filed in response to economic downtowns. This article will explore some of the recent patterns of U.S. bankruptcy filings.
1. 62% of U.S. personal bankruptcies are due to medical expenses.
Recent data shows that nearly two-thirds of all personal bankruptcies were due to medical expenses. Surprisingly, they also reported that 72% of those filings came from individuals who had some level of health insurance – shattering the myth that medical expenses are the scourge of the uninsured.
Serious illness, hospitalizations, and ongoing treatments can leave people with overwhelming medical bills. These bills can easily and rapidly eradicate savings, equity accounts, and college funds, leaving people with few options. Healthcare costs in the United States are at an all-time high, and the highly unpredictable nature of emerging diseases and treatment is forcing medical insurance rates higher.
Fact: 26% of Americans between 18 and 64 are struggling to pay their medical bills.
2. Individuals file 97% of bankruptcies.
While most people associate bankruptcy with corporations or business entities, personal bankruptcy represents the vast majority of filings. (You are not alone!) After medical expenses, the second most significant factor driving personal bankruptcy is credit debt. But as indicated, this is not credit card debt due to reckless spending but a reflection of job loss, illness, and rising inflation.
People are using credit cards more and more for basic necessities such as groceries and filling their gas tanks. Lines of credit are helping them to get through tough times – but it is easy for balances to get out of hand.
3. Well-educated people represent 20% of U.S. bankruptcy filings.
While the perception may be that those who file for bankruptcy are less educated and incapable of handling finances, the statistics show that those with higher education contribute significantly to bankruptcy filing stats.
The American Bankruptcy Institute Statistics reveals that:
* 20% of filers have a college degree
* 29% have some form of college education
* 36% are high school graduates.
4. 64% of people who file for bankruptcy are married.
The inclination may be that bankruptcy is more prevalent after divorce or among single people without the benefit of dual incomes. However, nearly two-thirds of people who file for bankruptcy are married and file jointly. In contrast, only 15% of those filing for bankruptcy are divorced, 17% are single, and 3% are widowed.
5. Only 5% of bankruptcy cases are attributed to reckless spending.
We mentioned that frivolous spending represents a small portion of personal bankruptcy. Still, a study presented at Boston College, MIT, Yale, and UCLA took this statistic to another unexpected level. Many people who filed bankruptcy after reckless spending sprees had planned on default all along – that is, they spent the money with the full expectation that they would file bankruptcy to eradicate the debt they were wracking up.
Although this unethical behavior represents a tiny portion of bankruptcy activity, it may cause lawmakers to further tighten up the rules around the personal bankruptcy process.
Do You Need Bankruptcy Advice?
We hope that these statistics prove that there is no one “type” of person who struggles financially, and many situations are out of the filer’s control.
Bankruptcy was created as an option to help those who find themselves in unexpected hard times. If that describes your situation, there is no need to feel shame or embarrassment, as you are not alone. Call the law offices of Richard V. Ellis today. Mr. Ellis is a Sarasota bankruptcy attorney who has helped hundreds of people back onto a solid financial path – people, it turns out, who are just like you.