Due to the stigma attached, there are so many misconceptions when it comes to bankruptcy. In my opinion, the worst misconceptions are the assumptions made about the type of people that file for bankruptcy.
There seems to be this standing notion that bankruptcy is morally and ethically wrong. As a result, those who seek bankruptcy protection are stereotyped as lazy, cheaters and deadbeats.
Not only is this assumption incorrect, but it is offensive to us as attorneys and to our clients.
Many hard working, successful people have fallen down financially and turned to bankruptcy to get back on their feet. Some very famous leaders and successful entrepreneurs have used bankruptcy to solve their financial woes.
As I like to form a personal relationship with my clients, I am bothered by the ignorance of this assumption. I decided to open up my files and see what a bankruptcy filer looks like.
I randomly selected 10 files to profile. I wanted to come up with a better understanding of who is filing for bankruptcy and try to share that information. Sure, you could easily look at demographic information pertaining to bankruptcy on the internet, but I wanted to take a more personal approach.
I did not distinguish between joint filers and bankruptcy chapters. I just wanted to see who was filing. Here is the story.
Some Interesting Tidbits
– Bankruptcy filers own homes. 8 of the 10 clients profiled are homeowners. 1 is a renter while the remaining client is currently living with family.
– Bankruptcy filers work for a living. 8 of the 10 clients profiled are employed. 2 work for major banks.
– Bankruptcy filers are the middle class. Of the 8 clients who are employed, 6 have a household income exceeding $75,000. 2 of these 6 have a household income exceeding $100,000.
– Some bankruptcy filers own businesses. 2 out of the 10 clients profiled are active business owners while 2 additional clients had owned a business in the previous six years. Not surprisingly, all of these clients indicated that their business had directly or indirectly caused their financial hardship.
– Bankruptcy filers have families. 7 of the 10 clients profiled are married and have children living at home.
– Bankruptcy filers pay their bills. This may sound confusing but it’s not. 6 of the 10 clients profiled were current on all of their monthly bills including mortgage payments, car payments, credit card payments and utilities.
– Bankruptcy filers are charitable. 6 of the 10 clients profiled regularly donate money or goods to charity.
– Bankruptcy filers have fallen on hard times. All 10 clients profiled indicated that they are in financial trouble due to loss of employment, loss of salary, a medical emergency or a failed/failing business.
Nothing to Gain
What many people don’t understand is that the so called “deadbeat” has nothing to gain by filing bankruptcy.
I am not even exactly sure how to define “deadbeat,” but someone who is not paying their bills will realize no benefit from discharging them in bankruptcy.
It is the hard working, responsible, middle class family/individual that stands to gain from the bankruptcy process. The fresh start only helps someone who is still in the game. I realized that the clients I profiled are not using bankruptcy as a “last resort.” They are people conscious of their situation and they are being proactive in taking care of their financial hardship. Thanks to bankruptcy, they will not reach “game over.”
The most important thing I realized when I was looking at this information is that I could easily fit the profile of a bankruptcy filer. In actuality, everyone does and that is why the stigma attached to bankruptcy and the ignorant opinions about those who file need to change.
Image courtesy of Gabi Agu (Flickr).