Who Files Bankruptcy?

Who Files Bankruptcy?
Who Files Bankruptcy?. Getty Images

Just Who Files Bankruptcy Anyway?

When I counsel people who are thinking about filing bankruptcy, I often hear that they feel alone, stranded, have never known anyone who has filed, have no one to talk with about it. It can certainly be intimidating when you think you’re the only one who has ever found himself or herself in severe enough financial stress to consider seeking a discharge of those debts.

In fact, bankruptcy affects all walks of life and all income levels. It affects married people and single people. Age is no barrier either. Seniors and those just starting out in life file bankruptcy.

Statistics can often give us a picture of averages, but the actual spread is large. Let’s start with some basic figures for the numbers of cases filed, in this case for the year 2016.

Cases Filed In 2016*
Total Filings794,960
Chapter 7490,365
Chapter 117,292
Chapter 12461
Chapter 13296,655

 

Business Filings In 2016*
Total Business Filings24,114
Chapter 715,033
Chapter 116,174
Chapter 12461
Chapter 132,259

 

Non-business Filings in 2016*
Total Non-business Filings770,946
Chapter 7475,332
Chapter 111,118
Chapter 13

294,396

 

Let's look at those numbers as percentages for each type of bankruptcy as compared with the total number filed in 2016:

Percentage of Each Chapter Filed in 2014*
Chapter 761.68%
Chapter 110.92%
Chapter 120.06%
Chapter 1337.32%

 

*These figures are taken directly from reports issued by the Administrative Office of the US Courts.

The statistics are reported by each of the federal judicial districts in the 50 states, D.C. and territories. That allows us to compare other interesting facts, like how many people file as compared to the general population.

For instance, in 2013-2014, the number of filings per 1,000 people topped 10.8 in one judicial district in Tennessee, but in the neighboring districts, the statistics show 4.3 - 6.8 filings per 1,000. Compare that with the northeast and prairie states where the filings per 1,000 are a low .6 - 2.2.  The blog Credit Slips has produced a helpful chart and list showing the filing rates in 90 federal districts.

It is difficult to pinpoint why there is such a wide variation in filing rates across the country, and the Credit Slips author posits a theory or two, like local legal culture, the presence or absence of effective debt collection laws like garnishment.

You can view more filing statistics by visiting the US Courts website.

What Factors Lead to Personal Bankruptcy Filings?

Because filling a bankruptcy case can be a huge decision with long-lasting consequences (both positive and negative), people who are contemplating filing bankruptcy often want to know if their reasons for filing are typical, reasonable or sound.

A study in 2005 reported that 46 percent of bankruptcies were related to medical debt. This conclusion has been borne out by other studies as well. This doesn’t mean that medical debt is the sole reason.

There are lots of contributing factors and contributing debts. Click here to see an interesting chart showing the reasons as reported by the filers themselves.

In addition to medical debt, leading factors that contribute to bankruptcy filings include unemployment and domestic issues like divorce. Note that most of these factors involve circumstances the filer could not control. According to this report, only 15% of filers report having to file because of actions they took and decisions they made that led to excessive credit card debt, large mortgages or high car payments.

More Averages:

  • The average filer is married, has a high school education and makes less than $30,000 a year.
  • In 2007, those younger than 25 made up less than 2 percent of filers. About 20 percent of filers are 55 years or older.  Median age is about 45 years old.
  • Women are slightly more likely to file than men: 52.4% vs. 47.6%. Women make up 51% of the U.S. population.
  • Those aged 65 and older make up about 8% of filers. Those aged 34 and younger make up about 19% of filers.

According to the Institute for Financial Literacy:

  • 73% of filers have a job or are self-employed
  • 27% make more than $30,000 a year
  • 94% graduated from high school
  • About 58% have at least some college
  • 5% have a graduate college degree
  • 30% are 34-44 years old
  • 14% make $50,000 or more a year

Bankruptcy affects all age groups and all socio-economic classes. In fact, it's easy to argue that there is no one "average" or typical bankruptcy filer. But if we were to build one, she would likely be a middle aged woman, married, Caucasian, with some college, who makes less than $30,000 per year. Even so, the statistics bear out that outside circumstances more so than age, income, or educational level play a huge role in decisions to file or not file.