However, studies have shown that there are other reasons that a person could initiate a bankruptcy filing. According to a study conducted by Harvard University, the following are the top five reasons that people file for bankruptcy:
1. Medical expenses
2. Job loss
3. Poor/excess of credit
4. Divorce/separation
5. Unexpected expenses
In addition to these reason, factors like education and socioeconomic status could also play a role, according to a study conducted in 2008 by Jay Zagorsky, a research scientist at Ohio State University's Center for Human Resource Research.
In his study, he found that those who file for bankruptcy are more likely to be divorced, female, less educated, have lower income, live in urban areas and have bigger families. This is compared to those who have never filed.
Why is Bankruptcy Occurring More Now?
There's no doubt that many issues have hit homes in the past couple of years. After the Great Recession began, companies quickly let millions of employees go, resulting in what some believe to be over 7 million jobs gone forever. That coupled with a recent drop in credit scores, record foreclosures and other issues that families have faced have resulted in bankruptcy being the only option for many.
As noted by bankruptcy lawyer John T Orcutt's blog, bankruptcies will likely continue to rise for some time as long as we still suffer the residuals of the recession. The unemployment rate is still high, resting at 9.3 percent and companies are still not hiring. Many individuals who have had to stop paying their bills to put food on the table and have seen their credit suffer as a result are likely to choose bankruptcy as a way to wipe their slate clean.
Is Bankruptcy Really That Bad?
There is undoubtedly a negative stigma attached to a bankruptcy filing. Not only does it ruin your credit, but it also supposedly has a negative effect on your ability to acquire a job or buy a car for many years.
However, according to the study conducted by Zagorsky, bankruptcy filers in many instances don't have as much bad after bankruptcy luck as many would think. For instance, the study found that 90 percent of bankruptcy filers have a car less than a year after filing, compared to 89 percent of those who never filed. Also, 74 percent of filers have full-time jobs within one and five years, compared with 73 percent of non-filers.
This, of course, doesn't mean that taking this route is always a good choice. For some, bankruptcy credit (your credit after bankruptcy) plummets and only slightly recovers slowly after many years, making it difficult to take out home loans and make other major purchases without being saddled with extremely high interest rates. What's worse is that a bankruptcy doesn't fall off of your credit reports for up to 10 years. However, you can totally rebuild your credit and get a new loan in about 2 years if you work on it.
Call Carol A. Lawson @ 727-410-2705 to schedule your free bankruptcy consultation. New filers only.
Posts
