How many people file for bankruptcy each year?
If you are considering filing for bankruptcy this year, you are far from alone. At any given moment, millions of Americans are struggling under oppressive debt. Statistics show that about 800,000 people will file for bankruptcy each year. Bankruptcy is quite common, with many now wealthy Americans having gone through the bankruptcy process at some point in their lives. To better understand bankruptcy trends throughout the years, our Xenia, Ohio Chapter 7 bankruptcy lawyers offer a look at some bankruptcy statistics below.
The Rise and Fall of Personal Bankruptcies
Bankruptcy laws emerged way back in the late 1800s. From the 1980s to 2005, the rate of bankruptcy filings steadily rose. In 2004, over five Americans per every 1,000 were filing for bankruptcy, a rate four times that of filings in 1980. In 2005, bankruptcy filings reached an all-time high, with over two million filers. From there, filing suddenly took a drastic drop, with just under 600,000 people filing for bankruptcy in 2006.
It is thought that the drop stemmed from changing laws enacted at the end of 2005. The new Bankruptcy Abuse Prevention and Consumer Protection Act placed income limits on the ability of people to file, creating what is now known as the means test. From there, filing rates again climbed. In 2017, nearly 500,000 people filed for Chapter 7 and close to 300,000 filed for Chapter 13.
Causes of Bankruptcy
The most common cause of bankruptcy among polled filers asked to name all the causes of their bankruptcy is overextension on credit, causing some 70 percent of bankruptcies. Next listed is a reduction of income, happening in about 65 percent of bankruptcies. Other common causes include unexpected expenses, job loss, illness or injury, divorce, the birth of a child, death of a family member, retirement, and identity theft.
Bankruptcy by State
Some states have a higher rate of bankruptcy filings than others. The four states with the highest bankruptcy rates (Alabama, Tennessee, Georgia, and Mississippi) are all in the South, which is thought to be due to the large number of seasonal workers in these regions. In Ohio, we see about 36,000 filings a year, which equates to 3.13 filings per 1,000 residents. This makes Ohio towards the top as one of the states with the most bankruptcies per year.
Bankruptcy statistics offer an interesting look into the health of our economy and the financial status of the average American consumer. Bankruptcy filers should take note that they are in good company should they elect to file for Chapter 7 or Chapter 13. A bankruptcy attorney can help you to assess whether bankruptcy is your best path towards a brighter financial future.