In the United States, bankruptcy statistics are climbing at an alarming rate. The past twenty years have seen a shocking increase in the number of people who are unable to manage their debt.
Thanks to public platforms raising awareness of these bankruptcy stats, there are many wheels in motion in the hope of seeing the climbing figures drop exponentially. According to the available stats, more than 1.5 million people are filing for bankruptcy every year.
So, what does it mean to file for bankruptcy? Well, filing for bankruptcy is a legal proceeding that may involve a business or an individual that cannot pay outstanding debts.
Today we are to be looking at some of these statistics in order to figure out why bankruptcy remains so common.
You’re probably wondering:
“What percentage of bankruptcy is due to medical bills?”
Let’s find out.
A study conducted by Harvard University has shown that without doubt, the most significant of all US bankruptcy statistics is that nearly two-thirds of all bankruptcies are down to medical expenses. One of the most interesting figures to come out of this study was that 72% of the bankruptcy filings had come from people with some form of health insurance.
While this was, of course, a shock, it also crushed the myth that medical bills are only affecting the uninsured.
More often than not, people who are taken by a rare disease or some form of serious illness will be left with hundreds of thousands of dollars in medical bills. Medical bills of this size can easily wipe out any savings, equity accounts, and college funds and leave no other option but to go bankrupt.
With the advancement in technology, the cost of healthcare in the United States is at an all-time high. With more people becoming patients and the emergence of new illnesses, health insurance is nowadays becoming expensive and extremely confusing.
It is no secret that Americans face their greatest financial difficulties when it comes to medical care. Since a massive 26% of Americans between the ages of 18-64 struggling to pay their medical bills, it’s no wonder these bankruptcy filing statistics show that medical expenses cause more people to go bankrupt than anything else.
When we look closely at US bankruptcy facts and figures, we often see the same things showing up. The one thing that does go ignored is that when it comes to causes of bankruptcy, being frivolous with our money can often land us in a lot of trouble.
A recent study presented at Boston College, MIT, Yale, and UCLA showed that some Americans are guilty of spending way beyond their means. While it may not be the leading cause of bankruptcies, this frivolous spending has revealed another shocking truth.
Namely, some Americans were using this spending beyond their means with the sole intention of filing for bankruptcy. Spending like this was used in order to eradicate some of their existing debt.
As you can see, while this may only represent a small percentage of the US personal bankruptcies by year, it can still put more pressure on the system to tighten the reins when it comes to how difficult it is to file for bankruptcy.
When we look closely at bankruptcy trends, one remarkable fact is that the vast majority of bankruptcies are filed by individuals.
Most people are probably under the impression that a great number of bankruptcies would fall under the corporate umbrella. The truth is, when we look at corporate bankruptcy statistics, they only count for 3% of the total.
While it may be difficult to come to terms with these figures at first, it shouldn’t really come as too much of a shock. We have already seen some mind-boggling medical bankruptcy statistics, so when we take into account the other personal causes of bankruptcy, the figures make sense.
So, to come to terms with these figures, let’s examine a few other causes of the high personal bankruptcy statistics.
While health care bankruptcy statistics make up for 62% of individual bankruptcies, the second biggest cause is credit debt. National bankruptcy data clearly shows there is a correlation between credit debt and bankruptcy, but the facts are not what you may think.
While most people would presume that credit debt is due to irresponsible spending, this is not always the case. If you suffer from job loss, illness, or even an emergency expense, you may be forced to use a line of credit.
A problem that you will have to face once you have filed for bankruptcy is that credit will probably no longer be an option for you. Your credit score after bankruptcy will no doubt plummet, and with a poor credit score, you are very unlikely to have a line of credit available to you.
According to recent studies and bankruptcy data, 8% of people have filed for bankruptcy on multiple occasions, and these repeat filers make up nearly 16% of all recorded bankruptcies.
People who do this are generally using the system to their advantage. It’s because of this that a common question is now answered with a resounding yes:
Is filing for bankruptcy public record?
Indeed it is.
Having the information available as a part of public record is hopefully a way of deterring repeat offenders and people trying to trick the system. However, it is worth mentioning that while bankruptcy cases are available via public records, this does not mean that the information is easily obtained by the general public.
If a person becomes bankrupted, their record will be made available on a public access system known as PACER. The PACER system has details on bankruptcy filings from across the United States.
Many misconceptions are flying around when it comes to bankruptcy. But the simple truth is, it can and does happen to anybody.
The American Bankruptcy Institute Statistics clearly show that while 20% of filers have a college degree, 29% have some form of college education, and 36% are high school graduates. As you might recall, even President Trump has filed for corporate bankruptcy on a few occasions over the years. While the Trump bankruptcy cases were not individual claims, he has filed a chapter 11 bankruptcy claim a massive six times.
(Source: Consumer Affairs)
According to findings by debt.org, men are more likely to file for bankruptcy than women. The gap between the two is very small, but the reasons are thought to be very different.
The majority of men who file for bankruptcy do so after losing high-paying jobs. In contrast, 48% of women who file for bankruptcy are forced to do so due to a divorce, as these divorce statistics show.
(Source: Law Offices Of Craig L Cook)
When we look closely at American bankruptcies, it seems that according to the American Bankruptcy Institute, a huge number of people filing for bankruptcy are on low household incomes.
The figures also correlate and show that only 9.2% of people who earn $60,000 per year go bankrupt.
2019 has certainly been a year for shake-ups when it comes to corporate filings for bankruptcy. Bankruptcy statistics in the United States show that bankruptcy statistics by year are unstable and can change very quickly.
In the second quarter of 2019, there were corporate filings for each of the below states:
Now, when it comes to bankrupt states and their trends, it’s not just for bankrupt companies that California’s name crops up. Over the years, the Golden State has been at the forefront of bankruptcy news, and it 2010, there were over a quarter of a million individual filings for California alone.
This all-time high was mainly caused by the recession of 2007. But since 2013, California has really started to pick things up, and the filings have dropped exponentially.
(Source: Dun & Bradstreet)
A 2019 study conducted by Dun & Bradstreet managed to shine a positive light on the global bankruptcy statistics.
It showed that from the 43 countries, 21 made reports stating that rates had dropped, 18 countries saw a rise in filings, and 4 countries reported no change at all.
This is a positive trend, but with impending economical changes coming thick and fast, the world bankruptcy statistics for 2020 will show things in a very different light.
There are going to be some rather extreme consequences from the delivery of Brexit and the ongoing trade disputes between China and the US. China is implementing a slowdown on consumer and industrial spending that will surely have a detrimental impact on the country’s imports.
In the United States, the Federal Reserve intends to put an end to the interest-rate bump, which will hopefully reduce the amount of pressure on businesses.
Nearly two-thirds of people who file for bankruptcy are married. In these cases, many of them file jointly for bankruptcy, as this can make the whole process a lot easier.
If we look at this alongside the other figures associated with filers, we can see that married people are far more likely to file for bankruptcy than any other demographic. For example, 15% of those filing for bankruptcy are divorced, 17% are single, and 3% are widowed.
If there is one thing that should be abundantly clear from this post, it is that there is no shame in filing for bankruptcy. While there may be certain connotations that are attributed to filling, most of them are false.
As you can clearly see:
Whether you are an individual or a business, filing for bankruptcy can be the helping hand you need to give you the fresh start you deserve.
While the latest bankruptcy statistics may be of some concern, they are there to help you see that after a short time, you will be on the path to financial recovery. And there is always light at the end of the tunnel.