Also known as “liquidation,” Chapter 7 bankruptcies are the most common chapter of bankruptcy filed in the United States. On average, approximately 62% of all personal bankruptcy filings are Chapter 7 cases. Chapter 13 cases account for roughly 37% of personal bankruptcy filings. Less than 1% of the remaining cases filed are individual Chapter 11 cases.
There are some differences in the filing percentages depending on the state. For example, in Alaska, nearly 80% of all personal bankruptcy cases are filed under Chapter 7. Meanwhile, in the Northern District of California, approximately 59% of personal bankruptcy cases are Chapter 7 cases.
A Chapter 7 bankruptcy is intended to help individuals, couples, and businesses obtain a fresh start in a short amount of time. If you qualify for Chapter 7, you could eliminate the majority of your unsecured debt in four to five months. The experienced Sacramento Chapter 7 bankruptcy attorneys at The Bankruptcy Group provide professional representation to people who are struggling financially. Call 888-710-4334 if you have questions regarding filing.
Chapter 7 bankruptcies have always dominated personal filings. Nearly 1.5 million bankruptcies were filed per year in the early 2000s. The vast majority of these cases were filed under Chapter 7. Prior to amendments to the U.S. Bankruptcy Code going into effect in 2005, personal filings soared to over 2 million cases. The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) radically changed bankruptcy, introducing many new requirements, including the means test and pre-filing credit counseling.
After BAPCPA when into effect, the number of bankruptcy filings dropped dramatically. In 2006, there were less than 600,000 personal bankruptcy cases filed. The number of bankruptcies continued to rise until they peaked in 2010 at approximately 1.5 million cases. Again, the vast majority, nearly 1.1 million, were filed under Chapter 7.
Since 2010 the number of cases has continued to decline steadily. In 2019, approximately 469,000 Chapter 7 cases were filed nationwide.
Chapter 7 and COVID-19
2020 saw another decline in filings across the county. Despite a significant increase in unemployment numbers due to COVID-19, only 378,953 Chapter 7 cases were filed in 2020. In total, bankruptcy filings dropped nearly 30% from the previous year. The only cases that saw an increase in 2020 were Chapter 11 filings as businesses sought to reorganize during the pandemic.
The total number of bankruptcy cases filed during the pandemic was the lowest since 1986. A contributing factor could have been the restriction of public access in many bankruptcy courts. Additionally, foreclosures were suspended, decreasing the number of Chapter 13 cases. It also should be noted that bankruptcy filings tend to lag behind economic downturns. For example, the recession and mortgage crash of 2007 and 2008 saw a steady increase in new filings until it peaked in 2010. It is possible that the impact of COVID-19 and Chapter 7 bankruptcies will not be felt for another year or two. The experienced Huntington Beach chapter 7 bankruptcy attorneys can help you get the relief you need.
Who is Filing for Chapter 7 Bankruptcy?
Business bankruptcy filings only represent a small percentage of filings every year. In 2019, only 5% of the bankruptcies filed were from commercial entities. Out of the 757,497 cases filed, 718,553 were personal filings. 480,206 of those bankruptcies were Chapter 7 cases.
There are some general trends on who is filing for Chapter 7. Widowed, divorced, and separated people are over-represented in filings. Another category of individuals who file for bankruptcy at a higher percentage than average are military veterans. Self-employed individuals and immigrants file for Chapter at a lower percentage than average.
Older Americans account for a larger percentage of bankruptcy filings. The average age has increased from 44 years old in 2007 to approximately 48 years old at the end of the following decade. One in every seven filers is 65 years old or older. As part of a growing trend, older adults are filing for bankruptcy at a significantly higher rate. Between 1991 and 2016, the filing rate for individuals between 65 and 74 increased by nearly 200%.
In terms of race, both white and black Americans are over-represented based on the population numbers. However, Asian Americans and Hispanics are less likely to file for bankruptcy. If you are filing for bankruptcy you should contact an experienced Folsom bankruptcy lawyer.
Why Do People File for Chapter 7 Bankruptcy?
Every person who files for bankruptcy has a unique story. While no two cases are the same, there are some trends in why people file a Chapter 7 case.
Losing a job is another reason many people file Chapter 7. The loss of income and the accompanying stress often leads to a financial crisis. On average, a household that suffers the loss of primary income is about 2.5 more likely to file for bankruptcy.
Medical bills remain a growing problem for many individuals and families. Nearly 57% of all filers indicate that they have significant unpaid medical expenses. In many cases, the medical debt is coupled with missed time at work.
Illness also is contributing factor to many Chapter 7 bankruptcy filings. As stated above, a prolonged illness could easily result in mounting medical bills while the sick individual is unable to work. Filing for bankruptcy is the likely result if a household’s primary earner is undergoing medical treatment and missing work for a significant period.
There appears to be a connection between divorce or separation and bankruptcy. However, the exact correlation is unconfirmed. Some cases find that economic stress fractures a relationship, leading to divorce and subsequent bankruptcies. On the other hand, the cost of a divorce coupled with establishing separate households often leads to unexpended and potentially overwhelming expenses. Whatever the connection, divorced and separate individuals account for a high percentage of Chapter 7 filers.
Contact Our Chapter 7 Bankruptcy Attorney for a Free Consultation
One reason Chapter 7 bankruptcies are popular is that they are effective. In many cases, filing a Chapter 7 is the most efficient way to lift yourself out of a financial hole. In four to five months, you could find yourself debt-free and in a position to start rebuilding your credit. If you are feeling the pressure and stress associate with overwhelming debt, contact an experienced Rocklin chapter 7 bankruptcy lawyer at The Bankruptcy Group at 888-710-4334.