The Face Of Bankruptcy Is Changing

In the past, many of those seeking bankruptcy protection were underprivileged individuals who suffered a lifetime of difficulty in making ends meet. These days it isn't uncommon for middle class, and even those considered "rich", to file for bankruptcy. The reasons behind bankruptcy filings among different socioeconomic statuses may be different, but one pattern is common among them all: the degree of hesitancy to file.

Myths And Misconceptions

One of the biggest reasons most people hesitate to file for bankruptcy is fear. Fear of the unknown and fear from ideas heard by others. Most people's view of bankruptcy has been tarnished by the myths and misconceptions about the process. People may fear losing all of their assets or that their credit will be forever damaged, both of which simply are not true. Others worry that friends, family or employers will find out about the filing, tarnishing their social reputation. Middle to upper class members are especially sensitive to this myth, as their social standing tends to be more important than other aspects of their life in many cases. Regardless of the myth involved, many people are missing out on the benefits bankruptcy can provide over information that is simply false or misconstrued.

Debts And Assets

As more middle to upper class individuals file for bankruptcy, so are the reasons why. For those in a higher socioeconomic level, assets tend to be of higher value and number. Protecting assets is one of the main advantages in bankruptcy and, therefore, becomes one of the main reasons for people to file.

While assets may run high among these individuals, so can the debt loads. People who make more also tend to spend more, making their overall debt burdens higher than those in lower socioeconomic positions. However, this runs at a disadvantage for those in higher economic standings. Since the qualification standards of a Chapter 7 case are primarily based on income level, it is rare for a person considered middle or upper class to qualify for Chapter 7 bankruptcy. Generally, people in this position will be required to file for Chapter 13, in which they restructure and repay their debts over time.

Filing for Chapter 13 may actually be beneficial to those with more assets, as the risk of having any one asset seized by creditors is very low in a Chapter 13 filing. The assets of someone in a higher economic position is better protected through a Chapter 13 case than in a Chapter 7 case.