75% Surge in Personal Bankruptcies
 

The Southern California region had the nation's biggest percentage jump in 2008, and the number this year through April is up 75% despite a 2005 rule overhaul aimed at curbing filings by those who would benefit unfairly. http://www.latimes.com/business/la-f...0,183018.story


QUESTION: Do bankruptcy and unemployment figures TRAIL signs of recovery or do they indicate that the worst is not yet over?

Cali is in rough shape all around right now. Crazy.

i think trail for unemployment maybe.

we are far from the bottom unfortunately.

Just had a major discussion with my girl's family over the weekend... beyond sad and unforunate what's going on out there... it will get alot worse before it turns around :2 cents:

I think that a lot of people are using this as a way to start over. They run it all up as high as they can and then file.. I think that the government/banks should be looking closely at this and respond appropriately when they find it.. its fraud when they do.

I LOL at stuff like this

Those new bankruptcy rules were literally written by the credit card companies.

It was called the "bankruptcy reform act" because that sounded better than "love letter to the banking lobby"

Most bankruptcies are a result of a job loss, a divorce or death of a spouse, a medical emergency, and here recently, home foreclosure.

It makes perfect sense that the rate of bankruptcy filings will skyrocket along with the unemployment rate, especially in areas like California where the housing crisis means you can't sell your house and move elsewhere to get a job.

I have to agree. A friend of mine is getting divorced right now. It is a bad time to divorce if you have to sell a house. He alone can't afford to keep the house so they are going to sell it. They bought it for 190K three years ago and now it is worth about 140K. The bank said they will let him short sell it for 140K and forgive the rest. They have a ton of debt via credit cards and stuff like that (part of the reason for the divorce) and his soon to be ex-wife has already said she wants this to go through quickly because she is a school teacher and just got hired at a new school. She starts in the fall, but if they can get the divorce done before then she is going to declare bankruptcy before she has any income so she can just wipe her debt out. She says herself she doesn't want to be in debt for years paying it off so she is taking advantage of the times.

That said I think there are a lot of people who are hurting. There are a lot of people who have been out of work for months and months and that can destroy you. If during that time you have some kind of medical issue and have no insurance you can easily get buried in an amount of debt you can't get back out of.

Actually most are result of poor planning and due to living on credit... :2 cents:

WASHINGTON (Reuters) - Medical bills are behind more than 60 percent of U.S. personal bankruptcies, U.S. researchers reported on Thursday in a report they said demonstrates that healthcare reform is on the wrong track.

http://news.yahoo.com/s/nm/us_health...3yLy GTkDW7oF

Wrong - Medical bills are the #1 reason :2 cents:

Divorce is probably high up on the list as well.

i agree. we should heartily cheer on the penury, punishment and destitution of the consumer class which pays all of our bills.

ps: ratios are down. i blame tubes.

Not sure I buy it, statistics and research can easily by spun to support any viewpoint. Medical expenses may have tipped those families over the edge, but I really don't think they were the root of their problems.

That article doesn't really provide any specifics about the research but look at this one:
http://www.msnbc.msn.com/id/6895896/

"Illness and medical bills were cited as the cause, at least in part, for 46.2 percent of the personal bankruptcies in the study."

"Out-of-pocket medical expenses covering co-payments, deductibles and uncovered health services averaged $13,460 for bankruptcy filers who had private insurance at the onset of illness, compared with $10,893 for those without coverage. Those who initially had private coverage but lost it during their illness faced the highest cost, an average of $18,005."


I'm not exactly a baller, but these numbers don't sound THAT high, they are barely a price of a low-end new car. If $15k unexpected expense causes you to go bankrupt, you must have some bigger underlining financial problem, especially considering that hospitals are pretty reasonable about collecting that debt, you just need to send them couple hundred a month and they'll leave you alone... :2 cents:

60% is the common average i've read over the last few years.

if you don't think a 15 grand debt can't sink an average american family - no offence man - but it can - people who work on the internet have very distorted views of the rest of society's expenses and incomes.

Woj, you should really read up on the issue, you sound like Ebenezer Scrooge man.

The fact is medical bills, and then divorce or death of a spouse, are the #1 and 2 reasons. Followed by the loss of a job.

The idea that people run up debts and then file bankruptcy in order to game the system is like Reagan's "welfare queen" who was supposedly driving a Cadillac.

Those amounts may not sound like alot to you, but to someone making $600 a week with a sick spouse and 3 kids, they're unaffordable. Then, when that hospital that is so reasonable starts garnishing your wages and you can no longer afford groceries for your children, filing bankruptcy to stop the garnishment is often their only option.

Also remember, a medical issue that will run up a 5 figure bill is usually one that will knock you out of work for quite awhile also, resulting in a double whammy of a huge debt and a loss of income.

One last point on bankruptcy in America. One of the reasons we have such a high level of entrepreneurship and a dynamic economy is because of the generosity of our bankruptcy laws.
People are more willing to take risks because they know if it doesn't work out they can start over again. (They'll have 7 years of bad credit, but they won't be garnished for the rest of their life or throw in debtors prison)

snake doctor is right.

The people living high on the hog and then just go bankrupt was the story they sold to the masses. So they would accept a bill that basically fucked the middle up the ass once again. Also remember the reason credit card rates got so high was because of the loose bankruptcy law. Funny after the new law came the rates didn't drop.

I think the reality of the modern US is that most people live right at the edge of their means. If you have a family of four, a house a couple of cars and the expenses that go with that you are probably still able to live within your means, but you are pushing it. Like someone else says along comes a major illness and you get sued by hospital then the next thing you know you are in deep shit and the house of cards starts tumbling down.

A friend of mine's wife has worked her whole life. About a month ago she was in transition and was moving from one job to the next when she got a pretty serious neck injury. Basically she had bulging disk and had to have an operation. So she never started the new job and was laid up for 8 weeks recovering. She recovers then they realize that it didn't work and have to go back in and fuse the disk. This has her laid up for another 6 weeks. Luckily their health insurance covered it all but when you add in the time recovering and the time she spent getting diagnosed she was out of work for about four months. The loss of her income alone really hurt them. They were able to cover it and skimp by until she started working again, but if they had also had 15-20K in medical bills on top of it they would have been in trouble. They live well within their means and don't even have car payments because they don't want the debt but that illness hurt them.

I do probably sound a bit like a cold asshole, but it's a bitch having to pay for someone else's fuck ups. It may not be obvious, but just like the bank bailouts, we are all indirectly paying the bill for all these bankruptcies.
It's one thing when a failed entrepreneur files for bankruptcy, but it's another when some careless idiot racks up well into 5 figures of credit card debt. Just look at these statistics:



"19% of Americans between the ages of 18-24 declared bankruptcy in 2001. (USA Today)"
"The fastest growing group of bankruptcy filers are those people who are 25 years of age or younger. (Senate Committee on Banking, Housing and Urban Affairs, 2002) " <= yea, I bet ya those are health expenses there :error
"# The typical filer is a white, married homeowner who works full-time, with a household income of less than $30,000 and an average debt of $47,000. (Not including home mortgage)"
"# 19% of filers are college students" <- yup, job loss, divorce and/or medical expenses there for sure :thumbsup
"# 51% of filers have a close friend or relative that has also filed " <- "What?! You are still paying off that debt like a sucker? File for banktruptcy, I did it, it was easy and painless!"
"# 63% of filers blamed credit card bills. 50% blamed mismanagement. 37% blamed pay cuts or job loss, and 28% blamed medical bills"
"# 43% of the general public polled said bankruptcy is an acceptable and easy way to settle financial difficulties"
Source: http://www.bankruptcylawinformation....event=dspStats

funny they also say this :

According to The Fragile Middle Class: Americans in Debt; written by Elizabeth Warren, Harvard Law School and Smith Business Solutions:

* the average age of a bankruptcy filer is 38
* Couples filing jointly make-up 44% of all bankruptcy filings Another 30% of the filers are women filing bankruptcy alone.
* Just 26% of the bankruptcy filers are men who are filing alone
* Another statistic says the most bankruptcy filers are slightly better educated than the general population
* Two out of three bankruptcy filers have lost a job
* Half of all bankruptcy filers have experienced a serious health problem
* 91% of bankruptcy filers have suffered a job loss, medical event or divorce
* The states that have the highest bankruptcy rates are Tennessee, Utah, Georgia, and Alabama
* 40% of bankruptcies result from medical crises, unemployment or divorces
* 90% of these filers have two car payments, a house payment, and an average of $2500 in credit card debt
* 10% of filers were delinquent only 5 to 29 days before bankruptcy

I hope you may never have to walk in those poor peoples shoes.

I dont understand how bankruptcy works?

If you claim it, the debt is all gone and you dont have to pay it?
That sounds like a good deal.

But do you have to give up your assets like your home, car etc?

You still owe the money when you file bankruptcy. Along time ago you didn't you were wiped clean. But now you still owe your debts. WTF is the point.

Make money, pay your bills, leave within your means. Upgrade sections of your life at a time. Oy.

Is that true? Why are people bothering to file?

This is not true, you've been given some bad information.

Some filers have to file chapter 13 now, which requires that you repay at least a portion of your debts. (You make payments to the court for 5 years, and the court pays your creditors)
It's a pretty complex system and I'm not going to drown in the minutiae here, but the bottom line is that over 80% of chapter 13 bankruptcies fail and the filer ends up in chapter 7 anyways.

See, what I said is true just not 100% accurate, lol. Some debts they clear off and some they don't I believe. Is it 5 years? I thought it was 7.

Yes, some people are irresponsible and abuse the system. That's true of every system in the history of the world though.

It's not uncommon, for someone filing bankruptcy, to "owe" a credit card company 10 to 20K, but they only ever borrowed 2K.
Then they lost their job, missed a payment, and the over the limit and late fees and 30% interest started racking up. After spending a couple of years trying to catch up, they've finally been thrown into a hole so deep that they can never climb out.

Alot of people pay off their medical bills with credit cards, and then fall behind on the credit card payments, and then this same situation happens to them.

As for your snide remarks about college students, credit card companies target college students, give them cards with a few hundred dollars in spending power, and then if they can't pay, tack on interest and late charges until the student owes them 10K.

If you want to feel morally superior to these people then I'm sure you'll be able to find statistics to back that up. There's a shitload of propaganda out there about bankruptcy, and it's put out there by the credit card industry. If you want to believe that instead of doing real research to find the true data, then more power to you.

I have a friend, a guy on my bowling team, who is an attorney who does alot of bankruptcies. I thought like you did until I talked to him about it for awhile. (I had a relative asking to borrow money to file for bankruptcy, and I was trying to talk them out of filling because I thought it was the wrong thing to do)
After listening to him and doing some research, I realized he was telling the truth.

Once you fall behind because of a job loss, medical emergency, death of a spouse or divorce, etc....it's almost impossible to catch up because of the onerous penalties and interest that then apply. You end up paying more in interest and late fees afterwards than what your total payments were before.

Most of the credit card companies have been paid back several times what they loaned by the time the borrower gets to bankruptcy. That's a fact that they don't want you to know about.

I agree fully.

And coming from me that's saying something :winkwink:

Again, you don't know what you're talking about. Maybe you should do some research before you start stating things as though they were facts.

A chapter 13 bankruptcy is a 5 year repayment plan. The amount repaid depends on the persons income and not on how much they owe. Once the plan is completed, all remaining debts are discharged.

A chapter 7 bankruptcy is a liquidation. All debts are discharged and all secured property is repossessed. The bankruptcy will remain on your credit report and affect your credit score for 7 years.

You can't discharge tax debt or student loans in bankruptcy. That was true even before the new law was passed in 2005 though, and is true regardless of which chapter you file.

there are a lot of people filing for bankruptcy because they think this is a good thing to do to get them out of debt. credit card companies are now raping people at 25-30% interest each month and now people cant afford their monthly payments.

my guess is people would rather file bankruptcy than have their house foreclosed on

when it rains it pours...

But that makes no sence. How is home foreclosure related?
These are unsecured Credit Cards. They cant force a home foreclosure.


Two separate issues. If people cant afford the credit cards, then dont pay em.
They arent going to take your house.

Also I dont understand why bankruptcy? That Chapter 13 doesnt sound good. You still have to make a settled amount payment and have the Bankruptcy on your record??

The card companies already have payment plans set up for people if they ask. Like 0 percent apr and lower monthly payments. Isnt that essentially what chapter 13 does but with more damage to ones credit?

I have a hard time understanding bankruptcy. Really I do.
Especially if its for unsecured credit cards. Why declare bankruptcy when you can simply tell them to fuck off for cheaper and less damage.

Sounds like an easy way out when just putting up a fight would be cheaper and less damaging. But hey thats just me.

I think the attorneys out there are smelling blood and talking people into bankruptcy when they dont need it to make profits for themselves. thats what i think is really happening.

You're right, I didn't understand that statement by that guy either.

Although if you have equity in your home, they can put a lien against it, so that you can't sell it without paying them back first.

Not all credit card companies do that. The ones that do, do so because they get more money from those plans than they will from the bankruptcy court.
With chapter 13 you pay for 5 years, anything not paid off at that time is discharged and you reset to zero.

IF you can get the credit card company to set you up with a plan, it continues until you pay it all back and if you ever miss a payment they may hit you with retroactive interest and late fees/penalties etc....and then you're going to end up in bankruptcy court anyways.


You can tell them to fuck off, and the interest and late fees will continue to rack up. (Another point, even though chapter 13 is fucked up....at least when you're in it, interest and fees stop completely, all your payments go towards principle)

Also, they can get a judgment against you that will follow you forever (or until you file bankruptcy) and they can garnish your wages, take your income tax refunds, etc.

Bankruptcy isn't an easy way out, but it is a way out for people with no other options.

They can do all that with unsecured credit card loans?
Jesus... Really?

I think what it is is if you don't pay the credit card companies eventually they will sue you and they can garnish your wages. If that garnishment causes you to not be able to pay your house payment you could lose your house. It isn't too likely, but it could happen. In todays market it is very possible that if you got garnished and couldn't make the house payment you wouldn't be able to sell the house either.

I have a friend that did a chapter 13 about 10-12 years ago. Basically he was stupid and ran up a bunch of credit card debt, bought a car he couldn't afford and was renting a place that was way too much money. He was spending 100% of his income. Then he lost his job and the new job didn't pay nearly as much so the bills quickly became late. Eventually with the late fees, interest and things like that it got to the point where a couple of them started wage garnishments. I don't remember how much in debt he was, but he did the chapter 13 and his monthly payments were really small. I think he ended up paying about about 25-30% of what he owed. He did get the car taken away though.

Here is the interest thing. I used to work with a woman who was a paralegal for a bankruptcy attorney. She said they would get cases where people declared bankruptcy then did it again 7 years later. During that 7 years they racked up 10's if not 100's of thousands of dollars in debt. They would get credit because the companies giving it to them would assume the would pay it back because they can't do bankruptcy again for 7 years and they would just string them along. They would make the minimum payments they could to stay out of court then after 7 years do another bankruptcy. Most people weren't that way, but there were some that were doing this just because the system let them. They took expensive vacations, had nice cars, lived way beyond their means and just played the system until they could declare again.

It's a binding legal contract, just like your mortgage or car loan. The only difference is there's nothing for them to repossess if you default. (That's the "unsecured" part, that it's not secured by any type of collateral)

They can and will sue you though.

So chapter 13 the payments are small? YOu only have to pay back 20-30% sometimes?
Hmmm.

I can smell an anal hobbit tip coming up. I need more info.

In my case I have a shitload of debt. Tons of it from all that gambling I used to do. Yes I didnt always win. And A lot of it from medical bills for my daughter that the insurance company said they would cover but 378k later decided they didnt want to pay.

I make decent money. I CAN pay what they ask but truthfully Id like options.
ITs no doubt cramping my lifestyle.

Ive all but told one credit card company to fuck off. They settled with me for 40% of the balance.

I was figuring to doing that with the others also.

Still I have a massive medical bill here that I cant dodge. The price of a home.

I can pay it but fuck.... Its really making things tough around here, shit you not. Unexpected.

Id have no problem claiming backruptcy on it if its as easy as all this is sounding.

I think they base the amount you have to repay on how much money you make. In my friend's case he went from making pretty good money to making about 40% less. He was going back to school so he could get a better job in the future, but at the time wasn't making that much so they take that into consideration when they determine the payback.

Furthermore when the cc company was threating garnishments etc, I told them to go ahead and try. Im self employed so they cant. My bank accts are here and over seas.

They told me they would stop my IRS refunds. I told them I havent gotten a refund from those bastards since 1997... Ive been paying them tens of thousands quarterly, never to see it again.

Really what can these fuckers do? Lein on my home. I dont plan on selling or moving. Go ahead.

Can they do anything else? Im just tired of being tired.

Ive tried getting local government involved with our medical bills issue. But they want no part in it. I guess when it comes down to it they are just bitches to the insurance companies they claim to be fighting. I just want to stick it to someone and tell em to fuck off. Just not sure who yet.