What Kind of People File for Bankruptcy, Anyway?

An argument fueling the passage of the new bankruptcy law was that consumers were abusing the system.  Proponents of the new law said that people were charging up their credit cards with things they did not need, hanging onto the valuable assets they purchased with those credit cards, and then obtaining easy bankruptcy discharges with no accountability to their creditors.  This rationale may apply to some, but not the majority of  financially challenged bankruptcy petitioners.

Medical Problems Are the #1 Reason for Bankruptcy

A study published by Harvard University shows that half of the people seeking bankruptcy protection are from the middle class who were forced to file due to unexpected medical expenses.  For these people, filing bankruptcy was an embarrassing but unavoidable last resort.

Failed new business startups are also cited as a contributor to personal bankruptcy filings. Some analysts believe that the tougher bankruptcy standards will discourage people from starting new businesses. 

Next:  Is Bankruptcy Right For Me?