A recent study found that bankruptcy filings are up among college graduates and those earning $60,000 a year or more. Also, it seems bankruptcy filings are also up for married people.
The study shows that the economic recession has caused financial stress which is spreading to those who may have more of an education, who earn more money, and even dual income families. The study, done by the Institute for Financial Literacy (a nonprofit organization that promotes effective financial education and counseling), collected responses from 50,000 individuals that filed bankruptcy in the past five years. Each of these people sought credit counseling (which is now required under the new bankruptcy law- typically bankruptcy attorneys help their clients obtain this).
The study found that those holding a bachelor's degree accounted for 13.58% of filings last year. That number is up from 11.2% in 2006- a significant 21% increase. Those holding high school degrees still accounted for the largest percentage of filers, being 36.27%, but their proportion as to all people filing bankruptcy fell by 8.6%. Those most at risk for a bankruptcy filing were individuals who attended college but did not complete a degree, the study said. They accounted for 28.7% of filings last year. This may be because these individuals are saddled with student loans, but don't have the rewards of an actual college degree.
Those earning $60,000 or more accounted for 9.2% of all filings last years, that is up from 5.5% in 2006, which is a 67% increase! Those earning less than $20,000 per year accounted for nearly 40% of all bankruptcy filings.
The study found that the number of bankruptcy filers who were married jumped above 60% in the past five years, from 57.2% in 2006. That out paces the 50.3% of U.S. adults that are married, according to the U.S. Census Bureau.
In California bankruptcy filings increased by 25% from 2009 to 2010. In San Jose bankruptcy filings increased 16%, with more than 13,000 people and businesses seeking bankruptcy protection.
Specifically there were 13,366 new cases filed in San Jose, 7,844 of which were Chapter 7 filings, and 5,376 people filing chapter 13 bankruptcy (a reorganization plan that allows people to repay part of their debt over time). The rest of the cases were Chapter 11 bankruptcies (usually for companies) and Chapter 12 bankruptcies (for family famers).
Ironically it looks like the passage of the new bankruptcy law (the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act) did not stop the increase in people needing to file bankruptcy.
Looking back at statistics and a comparison of bankruptcy filings under Chapter 7, Chapter 13 and Chapter 11 for the United States Bankruptcy Court Northern District of California (which includes San Jose, San Francisco and Oakland), shows bankruptcies rose sharply from 2007-2008.
In 2007 there were a total of 127,359 bankruptcy cases filed in the Northern District of California. The number of bankruptcies then rose each month and each quarter. In the 2nd quarter of 2007 there was a 16% increase in bankruptcy filings, the 3rd quarter of 2007 increased 7% more and then the 4th quarter of 2007 increased another 14%, for a total of 21,758 filings for the last three months of 2007. Then in 2008 there was an even larger increase in bankruptcy cases filed. The 1st Quarter increased 18% from the last quarter of 2007, the 2nd quarter of 2008 increased 26%, the 3rd quarter of 2008 increased 14% and the 4th quarter increased by 3% for a total of 38,011 filings for the last three months of 2008.
As the statistics show, bankruptcy filings increased by approximately 70% from 2007 to 2008. The number of home foreclosures and adjusting mortgages contributed significantly to the increase in bankruptcy cases, as did layoffs and the "Great Recession."
Our law office represents people in all aspects of financial reorganization and bankruptcy. For a free consultation call the Law Office of Ronald Wilcox, 408-296-0400.
