Despite the news being packed full of stories about big businesses or cities filing for bankruptcy, there is plenty going on with personal bankruptcy filings as well. Bankruptcy statistics show that there was a steady increase in filings until bankruptcy laws were changed in 2005. After that, filing numbers dropped significantly for both Chapter 7 and Chapter 13 cases, but have since begun a slow climb back to record high filings as the economy stalled in 2008. However, these numbers do not adequately reflect what is happening in America to the average consumer.
Not Just For The Poor, Or Rich
While most people tend to think that bankruptcy is just for those with very limited income or those with big assets to protect, the truth is that many average income families have ended up in bankruptcy over recent years. The average income family is not immune to economic effects or unforeseen life situations that can devastate their financial stability.
Although Chapter 7 cases are typically reserved for those with an income less than the median income of the state, it doesn’t disqualify everyone. In fact, many consumers whose income exceeds the means test requirement may qualify based on the ratio of their debts to disposable income. If a consumer has debts that significantly exceed what is required for debt repayment, they may qualify for Chapter 7. In the instance in which a consumer does not qualify for Chapter 7, Chapter 13 can still save their assets and reduce their debts over a period of three to five years. For any family that is struggling with debt and limited disposable income, bankruptcy can prove to be a good financial tool for their future.