The profile of the average American unable to pay accumulated debt is changing, and this time it seems certain markers of stability- namely college education and marriage- no longer offer the same levels of protection for everyday Americans from financial ruin.
In the past, lower-income Americans often found themselves in bankruptcy court filing for Chapter 7, as well as the newly divorced and broke- demographics more vulnerable to financial setbacks and more prone to spiraling debt issues. But new demographic data reveals that as fiscal hardships reverberate throughout the middle class, so too does the likelihood that Americans who have achieved these benchmarks of success will declare bankruptcy.
The data was released yesterday by the Institute for Financial Literacy, and their executive director Leslie Linfield spoke to press after the sobering stats were released. Linfield said the results are indicative of the impact of the Great Recession on Americans of every race, income level and education level:
“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.”
People with bachelor’s degrees made up 14% of filings in 2010, up from 11% in 2009. Interestingly, bankruptcies by those holding high school degrees dropped in proportion of filing parties by 9%- but still made up the largest amount of those filing bankruptcy, at 36%. One major factor was starting but not completing college, a circumstance found in 29% of filers in 2010. The study cites “all the burdens of school related debt and none of the rewards of an actual degree.” (And notably, hefty student debts are not discharged in any bankruptcy filing.)
The study included 50,000 bankruptcy filings, and all participants completed credit counseling prior to the filing.