Each year, hundreds of thousands of Americans file for bankruptcy in order to regain control of their finances. Recent bankruptcy data shows that job loss has played a key role in many of these bankruptcy filings. Continue reading to find out more about job loss and bankruptcy.
Job loss makes it difficult to meet mortgage payments
When individuals purchase a home, they generally expect to be able to rely on their monthly income to pay for their mortgage and their living expenses. Unfortunately, many homeowners see their household income suddenly shrink from unexpected job loss. This sudden unemployment can lead to home foreclosure and liquidation of valuable assets. In order to get bank on solid financial ground, many people end up filing a bankruptcy petition.
Job loss increases the number of Chapter 7 filings
Filing for Chapter 7 bankruptcy allows the petitioner to liquidate his or her assets in order to pay off a certain portion of the debt. This can be an ideal option for those who have lost their jobs, as monthly payments are not required. In contrast, Chapter 13 bankruptcy requires a steady income so that the debtor can meet a monthly payment plan.
Job loss affects both the middle and upper class
Bankruptcy due to job loss affects Americans of different economic classes. A high rate of modern bankruptcy petitioners have had a high income and possess high education levels. Many individuals with high-paying salaries have lost their jobs during the recent financial crisis, leading to an increase in the number of personal bankruptcies.