Who?s Bankrupt? Just Your Average Jane

The average consumer in the bankruptcy system is a white, married, working person between 35 and 44 who makes less than $30,000 a year, according to a year-long survey by the Institute for Financial Literacy.

The consumer is typically over-extended on their bills, may have lost his job or is facing lower income, and could have been hit recently with medical expenses. Women account for about 54 percent of consumers going through the bankruptcy system.

The Institute gathered its information from surveys in 2006 of more than 24,000 consumers that were preparing to file for bankruptcy or had filed and were undergoing financial education, says Leslie E. Linfield, executive director and founder of the Portland, Maine-based not-for-profit. The Institute’s study, “Who Went Bankrupt in 2006? A Demographic Analysis of American Debtors” is available at its Web site http://www.financiallit.org/
 
Changes in the federal bankruptcy law implemented in 2005 required that consumers seeking to declare bankruptcy must undergo counseling and that those who seek to discharge their debts must first complete a financial management course. The Institute provides both pre-bankruptcy counseling and financial education.

The Institute reports that nearly two-thirds of those in its study made less than $30,000 annually, 15 percent made between $30,000 and $40,000, about 8 percent made between $40,000 and $50,000, 4.2% earned between $50,000 and $60,000 and nearly 5 percent made more than $60,000.

Nearly 64 percent were working, 13 percent were unemployed, 9.4 percent were retired, 8.3 percent were self employed, 4.5 percent said they were homemakers, and 1 percent were students.

When broken down by age, consumers in the middle of their careers were more likely to be in the bankruptcy system. The Institute reports that 3.3 percent were 18 to 24; 21 percent were 25 to 34; 29 percent were 35 to 44; about 25 percent were 45 to 54; 14 percent were 55 to 64; and nearly 8 percent were 65 and older.

Linfield notes that 50 percent of those in the survey are from 25 to 44 years old, even though that segment accounts for less than 30 percent of the population, according to the Census. Specifically the largest group is those in their late 30s and early 40s, she says.

“That’s a concern because the largest group that is financially distressed will be retiring in 20 years. What happens when they hit retirement,” she says.