I get asked all the time, “why do people file for bankruptcy?” It sounds like a pretty straightforward question that should allow for a pretty straightforward answer, right? Not so fast. Yes, there are some standard reasons for bankruptcy that would appear on most everyone’s “Top 5” list. When I get asked that question, the person asking is usually interested in hearing about what is going on in our community these days. That is why, in order to answer the question “why do people see a bankruptcy lawyer,” you have to take into account time and location. For example, if someone was asking that question in Akron, Ohio in 1980, I am pretty sure the # 1 answer would be “because of all the rubber factories closing.” If someone were curious about bankruptcy filings in 2001, you might get an answer involving the dot-com bubble that caused havoc on the economy back then. If someone had asked me that question in St. Petersburg, Florida in 2009, the #1 answer on the board (Family Feud style) would have been “real estate.”
Having practiced bankruptcy law in the area for about 15 years, I have met a lot of people seeking bankruptcy advice. As I stated earlier, the reasons people file has changed over the years. I compiled my list through consultations with prospective bankruptcy clients. Generally speaking, the very first question I ask someone that has come to me for advice is, “what brings you in today?” That person’s #1 reason will usually be the first thing they say in response to that question. I might hear, “my ex-husband left me drowning in debt!” or “a car accident left me with bills I cannot pay.” My list is based on real life examples I’ve encountered in my practice. While some might question the scientific accuracy of my list, I call it like I see it. So, on to my current “Top 5” list of reasons people visiting with bankruptcy attorney in St. Petersburg, Florida:
It is often said that money is the number one stress factor in relationships. That stress often gets compounded when relationships end. The math alone is pretty easy to follow: a two-income family has now become two, one-income individuals. You may have been a very conscientious budgeter during your marriage. Your bills might have all been paid timely and you seemed to have things under control. However, if a family law judge decides that you have to pay your debts AND your spouse’s debts, and you have to do so with half the income you had before, you can see where things get dicey. People considering divorce, going through divorce, or are recently divorced, often seek the counsel of a bankruptcy attorney.
#4 MEDICAL BILLS
Yes, medical bills can be a killer. You may be thinking, “but Jesse, so many more people have insurance these days.” You’re technically correct. However, so many of the medical insurance plans offered today have high deductibles and co-pays, leaving consumers with thousands of dollars they cannot afford to pay. It is tough to budget for an unforeseen illness or injury. The respected financial website Nerdwallet.com recently found that medical expenses are the number one reason for bankruptcies nationwide (1).
#3 JOB LOSS
Job loss will be on just about everyone’s “reasons for bankruptcy” list. No matter how wise a saver or regimented a budgeter you may be, being out of work for a prolonged period of time can lead to bankruptcy. Large companies go through layoffs. Small companies go out of business. It can be particularly troubling when you are almost at retirement age, but not quite there. Although age discrimination is technically illegal, the majority of employers aren’t going to want to throw resources and time into bringing on an older prospective employee. It’s not right and it’s not fair, but it happens every day. The financial counselors at LSS Financial rank job loss as a top 3 reason for bankruptcy filings (2).
#2 POOR BUDGETING
Some say it’s a generational thing. I’m told that people that grew up during the great depression had a good sense of what to spend, what to save, and what to invest. Later on, people learned how fun credit cards could be. “Sure I can’t afford to buy it, but I want it, so I’ll charge it!” We’ve all done it. While it is tough to budget for an unforeseen event (illness, job loss, divorce, etc…), you need to save. Financial experts at CNN recommend saving 10% to 15% of your income (3). This reason for bankruptcies in St. Petersburg is a little unique compared to the rest. People do not generally like to come out and announce, “I’m here because I am terrible at budgeting.” I’ve had to read between the lines, look at the facts, and come to my own conclusions for this one.
#1 REAL ESTATE
Yep, still number one. But the market has come back, right? Actually, yes it has. Real estate lawyer guru, Matthew Weidner, recently wrote an article about “how St. Petersburg is the HOTTEST real estate market in the country” (4). Attorney Weidner is correct, but there is so much lingering damage from the Great Recession. Many homes are still underwater. Balloon payments on mortgages are becoming due and there’s not enough equity to refinance. People come to me for all sorts of financial issues, but “help me save my home” or “help me get out of this mortgage debt” are the two things I hear the most.
So there it is, my Top 5 list. In reality, many folks fall into multiple categories. It is not unusual for someone to get injured, lose his job, and then face foreclosure as a result. Whatever your reason for financial concern (top 5 or not), rest assured that we’ve heard it before and we’ve helped people just like you. You have options! A wise first step is taking advantage of Berkowitz & Myer’s no-cost consultations. Call us to learn more. We are here to help you.