Demographics of who is Filing for Bankruptcy in Colorado

December 9, 2010

By: David M. Serafin

Over 1.6 million Americans have filed for either chapter 7 or chapter 13 bankruptcy protection in 2010, which is the highest number since the new BAPCPA Bankruptcy laws went into effect in 2005. (It is currently unknown as to how many filings have taken place in Colorado during this time).

Back in 2006, before the economy was on the brink of the current economic recession, only 4% of bankruptcy debtors had college degrees. In 2010, that number has risen to 20%.

Also, earned income has risen during this same period with 5.5% of bankruptcy debtors earning over $60,000 per year in 2006 compared with 10% of debtors in 2010.

As a Denver bankruptcy lawyer, I’ve represented numerous “higher income” bankruptcy debtors, many of who earn $100,000 to $200,000 annually in traditionally “white collar” jobs. (You may wonder why somebody with this type of income would need to file for bankruptcy and the answer usually lies in the amount of unsecured debt. Not merely credit cards or medical bills at a high interest. Rather, many of these clients may be personally liable for a mortgage deficiency (plus late fees, attorney’s fees and foreclosure fees) resulting from a previous foreclosure, if such real property was significantly upside down. Another client guaranteed (e.g. co-signed) a mortgage loan which his adult daughter defaulted on.) Many of my clients are college educated and some even have Master’s Degrees.

Even though a bankruptcy filing is posted to your credit report and may affect one’s ability to obtain financing or a loan, get a job or find rental housing, my clients (particularly those with higher actual or potential income) will almost certainly opine that the fresh start in bankruptcy (e.g. discharging a high amount of unsecured debt) is by far the best option. The alternative is paying back this debt at very high interest rate (exponentially increasing daily), with late fees and other costs added.