Millions of people file for bankruptcy each year in the United States. California is no exception, with nearly 72,000 cases filed statewide in 2016 alone. Over 14,000 of those cases were filed in Sacramento, peaking during March when more than 1,400 cases were filed. These statistics make it clear that bankruptcy is common – but the better question is, why do so many people file bankruptcy? And even more importantly, should you be one of them? Sacramento bankruptcy lawyers discuss some common reasons for filing bankruptcy in California to help you get a better idea of whether bankruptcy might be right for you.
California Bankruptcy Statistics
The United States Bankruptcy Court for the Eastern District of California has jurisdiction over more than two dozen counties in the North California and Central California regions, including Sacramento County and Placer County. If you reside in Sacramento, Elk Grove, Arden-Arcade, Citrus Heights, Folsom, Roseville, Rocklin, Lincoln, Granite Bay, Auburn, or other cities in the region, you are served by the Sacramento Division, which is located in downtown Sacramento.
Like other bankruptcy courts, the Sacramento Division provides detailed statistics about bankruptcy cases filed in recent years. These statistics paint a picture of bankruptcy trends in California. Court statistics are highlighted below with bankruptcy in Sacramento by year. Totals may appear low due to omission of Chapter 9 and Chapter 12, which are extremely rare compared to other types of bankruptcy.
- Chapter 7 Filings – 12,912 cases
- Chapter 13 Filings – 3,227 cases
- Chapter 11 Filings – 73 cases
- Total Filings – 16,223 cases
- Chapter 7 Filings – 9,934 cases
- Chapter 13 Filings – 2,551 cases
- Chapter 11 Filings – 57 cases
- Total Filings – 12,552 cases
- Chapter 7 Filings – 7,656 cases
- Chapter 13 Filings – 2,254 cases
- Chapter 11 Filings – 40 cases
- Total Filings – 9,966 cases
- Chapter 7 Filings – 6,313 cases
- Chapter 13 Filings – 2,147 cases
- Chapter 11 Filings – 34 cases
- Total Filings – 8,500 cases
Medical Bankruptcies and Other Common Reasons for Bankruptcy
As you can see from the figures above, bankruptcy filings in Sacramento consistently declined from 2013 to 2016, shrinking by roughly half over just that short period. Nonetheless, as the data makes clear, thousands of people continue to file Chapter 7 bankruptcy in Sacramento or file Chapter 13 in Sacramento every year.
But what factors are driving all these bankruptcies? What are some of the most common reasons that people file bankruptcy in California?
While court statistics exclude reasons for filing, other sources of information can shed light on why Californians file bankruptcy. Five of the top leading causes of personal bankruptcy include…
Credit Card DebtMost studies estimate that roughly 70% of Americans have at least one credit card – and millions are in debt for that very reason. As of 2009, Americans had more than $953 billion in credit card debt, and by 2016, the average Californian household reported more than $5,700 in debt related to credit cards. People tend to have more credit card debt if they earn a high level of income ($160,000 per year or more) or are in the 35-year-old to 64-year-old age range.
HELOC DebtHELOC, which is an abbreviation for “Home Equity Line Of Credit,” is an unconventional type of loan in which the borrower, rather than receiving a lump sum from a lender, can borrow up to a certain credit limit during a set “draw period,” typically up to 10 years. When the draw period ends, repayments begin – but for many Californians, those repayments have led to deep debt. Government reports from 2009 revealed that Americans had over $577.8 billion in HELOC debt.
Medical Debt A 2013 study by NerdWallet Health, which combined data from sources like the CDC and U.S. Census figures, revealed medical bills to be the number one cause of bankruptcy in the United States.
Mortgage DebtWhile the market has rebounded from the mortgage crisis of 2007-2008, mortgage debt continues to threaten millions of households with the threat of foreclosure. Filing Chapter 13 bankruptcy can prevent your home from being foreclosed on. The Federal Reserve Board of Governors reported that, as of 2008, mortgage debt in the U.S. had climbed to $14.64 trillion. In 2015, a report by the Legislative Analyst’s Office found that, due to above-average housing costs in California, “the average California homeowner had $55,000 in mortgage debt outstanding as of 2013, about $17,000 more than the average U.S. homeowner ($38,000).”
Student LoansCalifornia is one of the top 20 states in the country for highest student loan debt. According to a 2017 report by Forbes, which sourced data from The Institute for College Access and Success, the average student loan debt in California was $22,191 for the Class of 2015. (For context, New Hampshire had the highest average student loan debt at $36,101.)
If you’ve thought about filing for bankruptcy due to these or other reasons, rest assured that you are not alone. Thousands of other Californians – and millions of other Americans – are in a similar position at this very moment.
No matter how challenging or hopeless your financial problems look to you right now, bankruptcy could be the first step toward financial stability and a fresh start. If you’re struggling with credit card debt, medical debt, mortgage debt, or other types of debt, we encourage you to learn more about your financial options by contacting the Sacramento Chapter 13 attorneys of The Bankruptcy Group for a free consultation about filing bankruptcy.
Sacramento Bankruptcy Attorneys for Chapter 7, 13, and 11
While there are certainly patterns in causes of debt, every debtor ultimately has their own personal reasons for considering bankruptcy. Our Sacramento Chapter 7 bankruptcy lawyers will take the time to evaluate your reasons for thinking about bankruptcy, so that we can help you make a strategic decision about how to proceed. Our Roseville Chapter 7 lawyers can help you determine whether bankruptcy is right for you, which chapter of bankruptcy is right for you, when you should file, whether you should file individually or with your spouse, which bankruptcy exemptions you should use, and other important decisions concerning the California bankruptcy process.