Archive for September, 2004

Written by Craig D. Robins, Esq.

Nowadays, those who are most likely to file for bankruptcy are middle-class families of the baby-boomer generation. In other words, the typical Long Island family. We previously considered middle-class families as a stereotypical group noted for their financial stability and for the vitality they provide to the American economic system. It is the middle-class family, however, that now has become the stereotypical bankruptcy filer.

I have observed this phenomenon in my consumer bankruptcy practice. Aside from some truly destitute clients that I represent on a pro-bono basis as part of the Nassau-Suffolk Legal Services Project, most of my clients are somewhat educated and hold, or have held, typical jobs, often “white collar,” that fuel the Long Island economy. Most of them are not young.

Yet, bankruptcies were once the primary domain of the young and struggling, or the lesser-educated who would spend their money recklessly, or those with young families who did not have savings cushions to carry them through lean times. However, it appears that we must now discard these stereotypes of bankruptcy debtors. More and more, even families with many years of positive financial experience, retirement nest eggs, home ownership, and perfect credit are finding themselves in financial holes that they cannot dig themselves out of.

Last month, the Wall Street Journal featured a front-page article: “New Group Swells Bankruptcy Court: The Middle-Aged.” The Journal story focused on “an emerging class of middle-age, white-collar Americans who make the grim odyssey from comfortable circumstances to going broke.”

It now appears that the demographic group with the highest rate of personal bankruptcies in the U.S. is no longer people with little education in the youngest employment bracket (age 25-34), but rather middle class, educated, white-collar workers in the 35-44 and 45-54 age brackets, representing an important shift from a decade ago.

The increase in middle-aged, middle-class people filing for bankruptcy is largely attributable to soaring medical costs, an unstable job market and years of easy money from aggressive credit-card marketing. Also, today’s baby boomers are not as frugal as their Depression-era parents, perhaps largely the result of being driven by societal pressure and temptation to finance the American dream by purchasing and spending beyond their means. This has all led to staggering amounts of personal debt which many middle-class families are becoming increasingly unable to handle, especially when the household becomes overextended. Many middle-aged individuals who have borrowed heavily have brushed off concerns, saying they expect to live longer and work longer.