Reasons for Bankruptcy are Varied

[Jul 25, 2007.]

A new study indicates there are a myriad of reasons behind consumer bankruptcies. The report shows that the vast majority of respondents, 63%, said they were overextended on credit. Such a figure may not be all that surprising, considering the widespread availability of credit cards in today's marketplace.

Failing to plan for the future may be another reason for financial troubles—57% of respondents cited unexpected expenses as the reason for their bankruptcies. Reduction of income was a culprit for 52% of those taking part in the survey. Unemployment was cited by 36%, while illness or injury was cited by 33%. 15% said divorce was a factor in their bankruptcies, while 9% said the birth or adoption of a child played a role.

The death of a family member was cited by 8% of participants, while 5% cited retirement as a factor. Identity theft was mentioned by 2% of those surveyed.

Interestingly enough, the Institute for Financial Literacy also found that women overall face more financial hurdles than men. 54% of the women studied were in credit counseling. The age cohort of women most likely to be in credit counseling and filing bankruptcy were women age 35 to 44, followed by women age 45 to 54, women age 25-34, with women age 18 to 24 making up a small fraction of the total number of women seeking bankruptcy relief.

According to the study, the women in the 35 to 44 year-old age bracket were seeking bankruptcy at twice the rates of their representation in the American population.

What these figures clearly indicate is that there appears to be a great need for financial education for middle-aged women. These women may, in fact, be part of the sandwich generation, forced to care for both children and parents—a situation which can produce a significant financial strain. Many may also be trying to pay for the educations of high school and college age children, leading to additional financial hardship.

Julie Ann Amos
July 25th 2007
Recent News

• Fed to Protect Homeowners from Mortgage Abuse
  The chairman of the Federal Reserve Board is determined to ensure that prospective homebuyers are shielded from lending practices that could be considered abusive—a move that some legislators say is long overdue. [July 25th 2007]


• New Hope on the Credit Card Front
  While the housing market appears to be sluggish and the overall economy may appear to be a mixed blessing, the outlook appears to be bright for credit card companies and their cardholders. [July 19th 2007]


• Low Interest Rates May Not Affect Stocks the Way We Thought
  While there are plenty of reasons for those in the financial community to support low interest rates, now comes word that such rates may not have the effect on stocks that investors have come to believe. [July 19th 2007]


• College Graduations Bring Decisions About Student Loans
  A number of college graduates are venturing into the job market this summer, hoping to earn enough money to start paying back their student loans. [July 17th 2007]


• Experts Recommend Comparison Loan Shopping This Season
  This summer, financial experts are recommending that consumers shop around when it comes to student loan consolidation. [July 17th 2007]


• State to Offer Students a Financial Incentive on Loans
  A number of government entities these days are trying their best to make school financing a bit easier for college students. [July 17th 2007]


• Congress Poised to Tackle Student Loans
  The $85 billion-dollar student loan industry is now under Congressional scrutiny. Education committees in the Senate and House have O.K.'d legislation designed to overhaul the country's student loan program. The overhaul is designed to help increase financial aid to students and make it easier for recent college graduates to repay their loans. [July 15th 2007]


• Student Loan Financial Group Announces Rate Increase
  Student Loan Financial Group says interest rates on variable-rate student loans will rise eight basis points to .08 percentage points on July 1 st. Therefore, student borrowers with older variable-rate loans are being encouraged to apply for loan consolidation by June 30 th to take advantage of the lower rate. [July 15th 2007]