According to a recent report, the Great Recession is spilling over to the middle-class as more Americans file for bankruptcy. The study - published by the Institute for Financial Literacy - reveals that bankruptcy claims increased in 2009 among individuals that hold bachelor's or graduate degrees and make more than $60,000 each year.
The report shows that unemployed Americans are filing for bankruptcy in higher numbers than they did in previous years and married couples saw an 8 percent increase in claims between 2008 and 2009.
"As in years past, the average American in financial distress and seeking credit counseling and financial education is a 35 - 44-year-old married Caucasian with a high school degree or some college who is working and earning less than $30,000 per year," Institute for Financial Literacy executive director Leslie Linfield said. "What differentiates the 2009 data from previous years is the increase in bankruptcy filings among individuals earning $60,000 or more a year, those holding bachelors or graduate degrees, and adults ages 55 and older."
Figures released from the American Bankruptcy Institute suggest that the national bankruptcy rate will grow to nearly 1.6 million filings by the end of 2010. Currently, consumer bankruptcy filings increased by 14 percent during the first half of 2010, totaling 770,117 claims. June alone saw bankruptcy filings increase by 8.5 percent to 126,270 claims.
"Years of rising consumer debt and low savings rates, combined with the housing and unemployment crises, are causing bankruptcy levels not seen since the 2005 amendments to the Bankruptcy Code," ABI executive director Samuel Gerdano said. "We expect that there will be more than 1.6 million new bankruptcy filings by year end."
Unlike defaults relating to credit card debt and foreclosures, bankruptcy will remain on a consumer's credit report for a period of 10 years and significantly impact their ability to secure loans and low interest rates. However, individuals can slowly rebuild their credit by paying all their bills on time and keeping any eye on their credit report for any mistakes or inaccuracies. Those still struggling with their finances should begin by creating a budget and cutting out any unnecessary expenses to save money. By making wise financial decisions and curbing spending, consumers will see improvements to their credit standing over time.