Who is the average person who files for Chapter 7 or Chapter 13 bankruptcy protection?

A lot of people who are considering bankruptcy feel a great deal of shame, guilt, and embarrassment. Some people believe that the stereotypical bankruptcy filer is someone who is lazy and dishonest.  Some people believe that they brought the situation on themselves, that they should have known better.  It is these stereotypes that make many people put off filing bankruptcy, when if they’d filed sooner they probably would have been better off.

I have worked on hundreds of bankruptcy cases, so I know from experience that the majority of people who file bankruptcy people are honest, trustworthy, and are going through one of the most difficult experiences of their lives.

Let’s take a look at some the main reasons that I have found cause people to file bankruptcy:

• Illness

There are many different types of illnesses and reasons that they put people into debt. Most people have inadequate health insurance (or none at all!)  Medical costs are enormous, so even what may be considered a minor illness can cause huge bills that push people drastically into debt.  Although companies are not legally allowed to fire someone due to a medical issue, they still can come up with “other reasons” why the person is terminated or laid off.  Some people find themselves with a chronic illness or injury that makes it impossible to work a regular job.  The amount someone can receive from Disability varies, but the fact is the amount is nowhere near an average salary.  People who are forced to sign up for Social Security Disability (SSDI) usually have to wait months, sometimes years, to get approved, (and even this amount is miniscule compared to the average salary). Until their case is approved they are on their own when it comes to basic living expenses.  And let’s not forget the caretakers of the ill and injured. When a close relative gets hurt or sick, such as a parent, child, sibling, or spouse, we want to be there to take care of them.  We all know that nursing homes, private nurses, and other types of home health care are extremely expensive as it is, but on top of that we don’t want to leave our loved one’s care to a stranger.

• Loss of Income

Millions of people in this country have lost their job for one reason or another. The company may have downsized or completely went out of business.  Your job may have been outsourced to another country where the employees are paid a tiny fraction of your salary.  Technology seems to have phased out more jobs than it has created.  Sometimes people are fired from their jobs, but this does not always mean that this person was a bad employee.  There could be a wide range of personal reasons.  As discussed above, some companies find another reason to fire an injured or sick employee.  Unemployment, if you are able to even qualify for it, is often a small fraction of what your income was previously. It doesn’t matter why someone lost their job, all that matters is what they are able to do next.  Unfortunately, this terrible economy has forced many average, hardworking, taxpaying Americans into abject poverty.  Many people spend months, or even years, without finding another job.  A large amount of people (who are not included in the unemployment rate) have been forced to be “underemployed”, so even though they are working it is for far less money and little to no benefits.

• Retirement

Retirement is supposed to be the time when people get to do all of the things they wanted to do when they were younger but weren’t able to because of family, educational, and financial commitments.  Most people envision their retirement as their time to travel, explore new hobbies, and spoil their grandchildren.   The reality is much more depressing.  Social Security isn’t even close to being enough money for someone to live off of.  Many people were not offered pensions, and if they did save for retirement there was often some kind of emergency that ate up the money. Many senior citizens have taken on the responsibility of helping their children and grandchildren, who are also suffering in this economic crisis.  The majority of the senior citizens who file for bankruptcy protection are hardworking, responsible, and honest, but instead of being able to enjoy their “golden years” they are forced to try and budget a monthly amount that barely covers their rent or mortgage.

The bottom line is that the average person who files for bankruptcy protection is not the irresponsible, dishonest crook that seems to be the stereotype.  I know from experience that the majority of people who file for bankruptcy have always been hardworking, paid their debts, paid their taxes, and tried to do the “right thing”.  The most common thing I encounter are people who are scared, embarrassed, and ashamed.  It is my job to let them know they are not alone.  There are many people who are in the same situation as them.  Being in debt can be one of the scariest, most stressful things that anyone can experience.  But there is a reason why bankruptcy protection is legal.  Our government understands that anyone can become buried in debt by a variety of unexpected circumstances.  Someone who files for bankruptcy is not a criminal, and they are definitely NOT a “bad” person.