On Tuesday, the Institute for Financial Literacy released a report classifying five years of American debtors. These results conveniently represent changes in the average American debtor as influenced both by the 2005 BAPCPA amendment to the bankruptcy code AND by the economic recession.
As an Arizona bankruptcy lawyer, I am not surprised by the reported results. From 2006 to 2o1o, the percentage of American bankruptcy debtors earning over $60,000 increased. The percentage of debtors holding one or more college degrees increased. The percentage of married debtors increased.
Not surprisingly, others have noticed these changes as well. In response to their published statistics, the Institute issued the following statement:
The Great Recession has had a dramatic impact on the bankruptcy filings of American consumers across the economic spectrum—including college educated, high income earners. While less educated, low income individuals continue to represent the typical bankruptcy filer, this report underscores sophisticated evolution of the profile of the American debtor that now extends to disparate age, income and ethnic groups.
For those that are interested in the numbers, here are a few points that summarize the findings of this study:
College education is no longer a financial safety net as the rate of degree holders filing bankruptcy increased by 20%
Bankruptcy filers earning in excess of $60,000 increased in rate by over 60%
The number of unemployed Americans filing for bankruptcy protection has jumped by 21% since 2006
Married Americans account for a larger percentage of consumer bankruptcy filings, increasing 12% since 2006
Over the past 5 years, Americans report struggling with reduction of income, job loss, credit over-extension, unexpected expenses, illness and injury, and divorce as sources of financial stress.
As an Arizona bankruptcy attorney, I can’t help but form opinions on these statistics. The first thing I noticed is the striking toll that the recent economic recession has taken on the once idealize American dream of the last half-century. Owning a 3,000 sq ft two-story in the suburbs and a shiny new sport utility monstrosity may not be an attainable or desirable goal for many Americans. Prudent financial planning may very well favor renting over owning, economical over extravagant.
In addition, I can’t help but overlook the marked depreciation of higher education. As someone who traded 7 years of his life for a fancy piece of card stock, it is a little disconcerting to thing that our most talented recent graduates are struggling to find work. Our longstanding desire to exist as a hub of knowledge and innovation is at risk if higher education continues as a financial detriment to those seeking it.