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    8 Bankruptcy Statistics To Know In 2021

    Offshore Legal Service Provider EST. 1996

16December

8 Bankruptcy Statistics to Know in 2021

In essence, bankruptcy is a legal option for individuals and businesses to provide debt relief when they cannot pay their debts. However, even if you are drowning in debt, you may be reluctant to file bankruptcy due to the many misconceptions that have been propagated over the years regarding the process.

For example, you may believe that filing bankruptcy is only for people with reckless spending habits. However, statistics tell a completely different story. Furthermore, they indicate that spikes in bankruptcy filings occur during times of financial uncertainty or difficulty (such as the aftermath of the COVID-19 pandemic).

If you are considering filing for bankruptcy, there are specific statistics you should know to get familiar with the process. For instance, the leading cause for filing, the state with the most filings in recent years, and how working with a bankruptcy attorney can increase your chances of success.

Here, we'll take a look at 8 of the most relevant bankruptcy statistics.

Table of Contents:

1. Most bankruptcies are due to medical debts

According to a study by Harvard University, the main reason Americans file for bankruptcy is due to hefty medical debts, accounting for about 62% of all cases. Moreover, they noted that 72% of those filings came from people with some form of health insurance. Therefore, both insured and uninsured people are vulnerable to experiencing financial hardship due to this issue.

These figures suggest that if you suffer from any illness or are seriously injured, you will likely end up thousands and thousands of dollars in debt, making bankruptcy your only way out.

Fortunately, bankruptcy is likely to eliminate all of your medical debts. This legal alternative will take that burden off your shoulders, allowing you to focus on getting back on your feet and returning to your everyday life.

2. Individuals file 97% of all bankruptcies

Many people think that the majority of bankruptcy filings are business-related. However, this could not be further from the truth. In fact, 97% of all bankruptcy filings are filed by individuals. As a result, there are more and more bankruptcy attorneys on the market.

Moreover, statistics show that about 8% of personal bankruptcy filers have filed multiple times.

As you can see, personal bankruptcy is much more common than you might imagine. Therefore, if you are drowning in debt, it could be an excellent option to get rid of it.

3. Women file for bankruptcy more often than men

Women face specific financial difficulties different from men. On average, they tend to earn about 76.5% of what men earn and are less likely to receive promotions when working in lower-level jobs. In addition, they are more likely to have to deal with all the household expenses as single mothers.

For these reasons, it's no wonder that a study by Debt.org found that 48% of bankruptcy filers are men, while 52% are women.

However, just because they are more likely to resort to bankruptcy doesn't mean that this legal alternative is a poor choice for regaining control of their financial lives.

4. 60% of all bankruptcy filers earn less than $60,000

Figures related to American bankruptcies reflect that about 60% of bankruptcy filings involve people earning less than $30,000 per year.

Supporting a family on only $30,000 each year is quite challenging in the U.S., so it is not surprising that low-income households account for a large portion of annual bankruptcy filings.

5. California is the state with most bankruptcy filings

Over the years, California has been (and continues to be) the state with the most bankruptcy filings in the United States. During 2021 alone, there have been nearly 20,000 bankruptcy filings in California. On the other hand, during 2011, there were more than 240,000 bankruptcy filings in this state. It is worth noting that the second state with the most bankruptcy filings that year was Florida, with 94,815 filings.

This is because consumer protection laws and wage garnishment policies are more lenient in this state, which is detrimental to people like you.

If you need legal assistance during your California bankruptcy filing, you should consider a bankruptcy attorney.

6. Bankruptcy cases have decreased, but…

During the COVID-19 pandemic, many experts expected bankruptcy cases to skyrocket due to the financial hardship caused by the quarantine and other disease containment measures. However, the opposite happened. Although many businesses had to close, job loss rates were the highest since the Great Depression; bankruptcy filings were down about 27% from last year.

However, this could be due to reasons that have nothing to do with the effectiveness of the process. For example, although many individuals and small businesses are drowning in debt, they may choose not to file for bankruptcy because of misguided beliefs about the procedure or the high attorney's fees they would have to pay to do so successfully.

However, both expert economists and experienced attorneys advise the public not to fear the bankruptcy process. If you are drowning in debt, this may be the alternative you need to stay afloat.

In addition, consulting with a reputable bankruptcy attorney may help clear up any doubts you may have about the process.

7. 5% of cases are due to reckless spending

Although it is not the leading cause of bankruptcy, it is worth noting that overspending remains a significant reason why many people file for bankruptcy.

Many people spend beyond their means, giving no thought to the consequences such a lifestyle may have. About 5% of all bankruptcy filings are due to this reason.

On the other hand, some people max out their credit cards and spend more money than they have, intending to abuse the bankruptcy system, thinking that the process will eliminate their debts no matter what. However, doing this could cost you dearly, as you could be charged with bankruptcy fraud and face prison time.

8. Working with an attorney increases your chances of success

Although bankruptcy is a helpful process, that does not mean it is simple. On the contrary, bankruptcy can be very complicated if you are unfamiliar with the process. Thus, your best bet for a successful filing may be to work with an experienced bankruptcy attorney.

Furthermore, the numbers back up this assumption. According to the American Bankruptcy Institute, attorneys represented their clients in 91.5% of Chapter 7 bankruptcy filings and had a success rate of 96.2%.

On the other hand, those who represented themselves during their Chapter 7 filing only had a 66.7% success rate. In other words, more than one-third of these individuals did not get the discharge of debts they needed just because they chose not to work with an experienced attorney.

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