This year, more than 8,000 families in Idaho are expected to file for bankruptcy, a third coming from South East Idaho. This was the estimate of Bankruptcy Judge Jim Pappas of the District of Idaho.
According to Pappas, three main reasons precipitate the need to file for bankruptcy.
The first is medical costs that are too high to be paid by the bankruptcy filer. This primary reason accounts for half of all bankruptcy cases in Idaho. Most of the bankruptcy filers affected by exorbitant medical fees do have insurance, only not enough. So they have to resort to paying off their medical bills using their credit cards which puts them further in debt. Due to this, a reform of health care in the country is a necessity. But whether the recent health care reform initiated by the government is the correct answer remains to be seen.
The second most prevalent cause of bankruptcy is the loss or interruption of jobs and careers. Most people’s assets are so highly encumbered that even being out of work for two or three months might result in bankruptcy.
The third major contributing factor to the rising cases of bankruptcy is marriage and family problems. The most severely affected are single mothers who generally have more limited means of income compared to men.
There has been a disconcerting trend lately where bankruptcy filers are increasing among the very old and the very young. Generally those in their middle age are not affected as much. The elderly have had to file for bankruptcy largely because of high medical bills. On the other hand, the younger ones file for bankruptcy mostly due to overspending with their credit cards coupled with the skyrocketing cost of going to college.
Although there still exists a social stigma attached to bankruptcies, Judge Pappas sees it as a vital economic safety net that fosters risk taking and entrepreneurism that America is known for. He notes that even Abraham Lincoln had filed for bankruptcy in his lifetime, after he failed in becoming a storekeeper.
Part of the reason for the social stigma is that bankrupts are seen to be people who cop out of their responsibilities to pay their debts and use bankruptcy as a means to game the system. But in all his years of experience as a bankruptcy judge, Pappas estimates that only 1 to 3% of filers have questionable motives for filing bankruptcy. The vast majority of Americans and certainly those in Idaho who file for bankruptcy are genuine people. 93% of bankruptcy cases are filed by individuals not businesses.
Are you someone thinking of filing for bankruptcy? Call us for a free consultation at (813) 200 4133.