By Jeff Curl, San Mateo Bankruptcy Attorney
This blog is not a compilation of statistics; this is observations of my clients’ stories. While we represent both creditors and debtors, I was thinking about the debtor-side of the equation and why people (I am excluding the business clients) find themselves in bankruptcy.
This topic has been discussed by my colleagues around the country, and reasons for filing bankruptcy vary by geography, marketing to clients and other factors. In other words, what may be true for my practice is not necessarily true for my colleagues.
How The Story is Told
When a new client makes an appointment, we have them fill out a short two-page questionnaire about family size, home ownership, debts, assets and income, among other information. They send this to us before the appointment so that we have a chance to review and consider their situation before meeting, and identify potential problems and solutions.
But before diving into the details or discussing the options, I usually set the questionnaire to the side and ask the client to tell me why they are meeting with me, and what they hope to do. And I shut my mouth and listen because everyone has a story to tell and I am interested in hearing what happened and what the client wants and hopes to accomplish.
Some stories are short, some are long. Some give great detail, some hesitate because verbalizing their debt problems is painful. But with a little prompting most are actually eager to share their plight. We’re humans, we like to talk about what happened, if not for therapeutic or legal reasons, simply for social contact.
Five Reasons I See People Filing Bankruptcy
What I have learned from my San Francisco area bankruptcy clients about how they came to find their way to my office is this:
- Unemployment and underemployment. The job market is just really tough. And even if you are lucky enough to have a job, the Bay Area is so expensive that it may not be enough. Or I have many clients in that 50+ age group that are well educated and have a hard time finding a job in market that often worships youth.
- Being a parent is expensive. Parents almost always want their children to succeed. I have parents that provide housing to kids into their adulthood. Parents are co-signing student loans and car loans when the kids cannot actually pay for them. They pay for private school tuition and piano lessons, going into debt trying to give their kids the best opportunities for success.
- Life-changing events. Divorce, deaths, injuries, job loss and other unforeseen or just plain difficult situations can reap financial catastrophe upon anyone. Not only did something turbulent happen, but most people try to maintain the same lifestyle and expenses in hopes and expectations that things will return to normal. Sometimes this is just denial, sometimes it just doesn’t pan out after good faith efforts.
- Entrepreneurial risk. Whether starting a business or flipping properties when real estate suddenly collapsed, many clients found their dreams turned to nightmares. Sure, some people did not calculate the risks carefully, and some got greedy. Most just got caught in a financial collapse or circumstances that most could not see coming. Failure is part of risk-taking, and sometimes it results in bankruptcy. But I think most of these people go on to succeed eventually.
- Irresponsibility. While definitely a small minority, some clients will tell me with regret and embarrassment that they just screwed up. They overspent, under-saved and really had no plan or direction. Many were just financially illiterate. Replacing tires on the car which is really ordinary maintenance was suddenly a financial emergency. They rented a nicer apartment with a better view, had nice clothes and ate out too often. Now we were filing a Chapter 7 bankruptcy and they learned a very difficult lesson.
It is extremely rare to encounter the client that is hoping to “work the system” or is casual about his or predicament. Even those that appear to be aloof are usually just masking a bruised ego.
There are many reasons people file that I have not described, but these are some categories that come to my mind. The thing I like about reflecting back on this is that I appreciate how much people want to repay their debts and struggle mightily — psychologically and financially — before seeing me. It is not taken lightly by my clients and the relief they feel at the end makes my practice area particularly gratifying.
Image Credit: Creative Commons
