Everyone knows the economy has spent the better part of the past few years slowly circling the drain. High unemployment rates, an increase in the number of foreclosures, declining wages and benefits, and growing debts have all added up to a very nasty outcome.
Simply put, the bankruptcy statistics for this country are shocking–far worse than most people realize.
Here are five surprising statistics about bankruptcy and some of the most common reasons people go bankrupt.
1) Bankruptcy filings shot up over 30% in 2009
According to statistics released by the Administrative Office of the U.S. Courts, bankruptcy filings increased nearly 32% in 2009, from 1,117,641 in 2008 to 1,473,675 in 2009. This includes both business and non-business filings. Business filings increased by 40% in 2009, and non-business filings saw a 32% increase. The majority of these filings were Chapter 7 filings, but Chapter 11 and Chapter 13 also saw increases in 2009.
2) 1 in every 70 US households files for bankruptcy
About one in every 70 American households files for bankruptcy. Considering the average size of U.S. communities, this means that there’s a good chance you or someone you know has recently filed for bankruptcy. The economy is taking its toll on all of us, no matter what age or ethnicity.
3) 43% of American families spend more than they earn each year
Deficit spending isn’t just for governments anymore. Even though (or perhaps because) the economy continues to worsen, consumer debt continues to increase. And the sharp increase in bankruptcy filings is proof that too many Americans get buried in debt they simply can’t afford to pay off. The average family has about $16,000 in credit card debt alone. When you add in mortgage debt, student loans, and more, those figures get multiplied. And when you make a habit of spending more than you earn (even when it’s out of necessity), the specter of bankruptcy looms ever larger.
4) Most of 2009 had over 100K bankruptcy filings per month
The American Bankruptcy Institute released data that shows ten months in 2009 had bankruptcy filings top 100,000—January and February were the only two months in 2009 where consumer bankruptcy filings didn’t eclipse 100,000 for the month. In the remaining ten months, bankruptcy filings exceeded this six digit threshold each time. This is just another indication that the past few years have been tough for families all across the U.S.
5) Highly educated people are also being hit hard
With so many households filing for bankruptcy, one thing we’ve learned is that no one is immune to these tough economic times. Although those with no college education file bankruptcy at the highest rates, people with college and even graduate degrees commonly file for bankruptcy as well. According to the Institute of Financial Literacy, more than 12% of filers have bachelor’s degrees, and more than 5% have graduate degrees.
Causes of bankruptcy
The top five reasons for declaring bankruptcy are:
1) Overextended on credit
2) Unexpected expenses
3) Reduction of income
4) Job loss
Light at the end of the tunnel?
If you’re looking for a silver lining, here’s the best we can find: bankruptcy is typically viewed as a lagging economic indicator. In other words, bankruptcies tend to stay at high levels even after an economic turnaround has started taking place, so the fact that they’re still being filed in droves doesn’t necessarily mean the economy is still in shambles. (Although if you’re one of the millions who have filed or are considering filing, it might be hard to tell the difference.)