When people think of bankruptcy they tend to envision someone who has struggled with finances for years, probably makes minimum wage or has trouble keeping a job. The truth is, bankruptcy filings have hit nearly every demographic and is not just for the underemployed or uneducated. Many college graduates, corporate leaders and the average middle class American have been forced to seek bankruptcy protection in tough economic times. Further, certain life circumstances happen unexpectedly and can challenge even the most financially advanced family. However, as the demographics of bankruptcy filers change, one thing hasn’t changed: the hesitancy of many to seek the help bankruptcy can offer.
Most people avoid bankruptcy because of numerous misconceptions involved with the process. The assumption that all assets will be lost, friends and family will find out and that your credit will be ruined for years to come are all false ideas that prevent people from utilizing the valuable services bankruptcy can provide. Surprisingly, recent trends suggest that as the need for bankruptcy progresses up the socioeconomic ladder, the level of hesitancy also increases. Why?
Middle and upper-class Americans are less willing to file for bankruptcy for several reasons. First, people in this economic level tend to have more cash savings or accounts available to help cover costs for a while when financial hardships hit. With more cash on hand, they feel they can ride out the financial times and tend to be more hopeful situations will change. People in this demographic also carry more confidence about their ability to find work or resolve underemployment issues more so than someone who has been unable to rise out of a lower economic level. Perhaps one of the biggest reasons people in middle to upper class shy away from bankruptcy is their asset level. The more assets a person has, the more important protecting these assets becomes; which is odd considering that asset protection is what a Chapter 13 bankruptcy is designed to do.