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Report Shows That Most Personal Bankruptcy Filers Are Now Middle-Class

December 1, 2009

As Orange consumer bankruptcy attorneys, we were pleased to see that the press has taken note of the growing diversity of our personal bankruptcy clients. USA Today reported Nov. 24 that individual bankruptcies are now largely filed by middle-class people -- and have been since before the current economic downturn. In support, the article cited a new study by scholars at Ohio University and Harvard Law School, entitled "The Vulnerable Middle Class: Bankruptcy and Class Status," which will be released as a book in 2010. That study found that more than 100,000 middle-class families filed for bankruptcy every month as of 2007, and that those filers were in worse shape than bankruptcy filers in 2001.

The study disputed the widely held notion that a college education and homeownership are enough to guarantee financial security. From 1991 to 2007, the proportion of bankruptcy filers with at least some college increased from 46.5% to 58.9%. Meanwhile, home equity, considered a fallback resource, simply increased mortgage payments for homeowners who tried to use lines of credit to pay off medical, credit card or other debts. Rising unemployment and unwise spending habits have also contributed to bankruptcies, the article noted. The result can be emotionally devastating for people who thought middle-class status was enough to keep them out of bankruptcy.

That was true for Staci Schubert, 40, of Costa Mesa. Schubert has been a graphic designer, sales executive and, since 2003, the owner of her own handbag and accessory design business. Much of her savings went to launch the business, which was a problem when sales slowed in 2007. Schubert, a single mom of a two-year-old son, racked up $65,000 in credit card debt and began looking for a job, but only found freelance design work. In early 2008, she filed for a California Chapter 7 bankruptcy -- something she never thought she'd do when she was making six figures annually.

Our San Bernardino County bankruptcy lawyers have seen more and more people like Schubert in the past few years. As the article notes, bankruptcy filing can be emotionally difficult for them, in part because they thought they were doing everything "right." In fact, some of our clients have done a good job of managing their money, but were wiped out by medical bills or other unsecured debts that quickly spiraled out of control. When they come to see us, some of these clients feel ashamed or guilty -- even though filing for bankruptcy can actually improve their financial situations. As individual bankruptcy attorneys, we hope that articles like this one can help remove the stigma on filing for bankruptcy and help guide people toward the financial moves that can help them get back on their feet.

Based in Anaheim, Howard Law LLP represents people throughout California who are considering bankruptcy as a way to regain control of their financial lives. We help clients who are facing serious financial problems because of unsustainably high mortgage payments, credit card debt, medical bills or other obligations. Even if you're not sure bankruptcy is right for you, we can help you explore all of your legal options, including debt settlement and loan modifications as well as bankruptcy. If you are, our Oceanside bankruptcy attorneys can guide you through the process of deciding on Chapter 7 or Chapter 13 bankruptcies and the financial work that they entail. We want to leave all of our clients in better financial situations than when they walked through our doors.

If you're afraid you'll never be able to pay off your debt and you'd like to explore some alternatives, don't hesitate to call Howard Law. We offer free, confidential consultations to all potential clients, so you risk nothing by speaking to us. To set one up, please contact us online or call toll-free at 1-800-872-5925.