With bankruptcy filings ever on the rise attorneys and researchers are beginning to achieve greater insight into who is impacted and how people are impacted by bankruptcy. A number of studies have been done to examine this very issue, including the 2007 Consumer Bankruptcy Project. It comes as little surprise that various demographic groups seem to be more impacted by the staggering economy, and thus, more likely to file for bankruptcy. Even among those who file there seem to be some disproportionate effects.
Individuals filing for bankruptcy are increasingly those we would consider to be middle class. These individuals are our neighbors, our teachers, our police officers, our family, and our friends. In her book, “Broke: How Debt Bankrupts the Middle Class”, Katherine M. Porter examines how middle class Americans wind up filing for bankruptcy. Her findings are that a number of things that are commonly seen as middle class achievements, including “owing a home, attending college, and starting a small business” are among the most likely reasons to lead someone to file for bankruptcy. The stigma that individuals filing for bankruptcy must have made irresponsible decisions simply doesn’t match this finding. Here we are talking about people chasing the American Dream, and sometimes is doesn’t go according to plan. Porter finds that small business owners and self-employed individuals are much more likely to file for bankruptcy than their more traditionally employed counterparts.
When individuals lose their home, their business, or both, the impact can be devastating and long lasting. Many individuals ending up moving back in with family or friends for extended periods. Losing a house can be a devastating blow to self esteem and morale. The book discusses how women are much more likely to carry the emotional burden of such loss and the impact that may have on family cohesiveness.
The book goes on to discuss the racial disparity of bankruptcy filings, reporting that African Americans are twice as likely to file a chapter 13 bankruptcy than a chapter 7. Chapter 13 repayment plans are more costly than chapter 7, due to monthly plan payments and attorney fees associated a chapter 13 filing. Chapter 13 plans also take substantially longer to complete, keeping an individual in the proceeding for longer periods of time.
With bankruptcy filings increasing, and no apparent end in sight for a struggling economy, we should consider how bankruptcy filings affect our neighbors, or friends, our colleagues, and even society as a whole. It seems that increasingly, bankruptcy filers are individuals attempting to take all the “right” steps and struggling to do so. If you have questions, or would like to schedule a free consulation, contact a St. Louis Bankruptcy Attorney today.