No, this blog article is not going to employ any scientific study of how folks end up in Massachusetts bankruptcy , but perhaps this is a somewhat empirical study of what a Massachusetts bankruptcy lawyer sees, after years of filing personal bankruptcy petitions on behalf of clients in Massachusetts.
There are no conclusions, only thoughts.
First, let’s look at Jerry Maguire, played by Tom Cruise in the movie of that name. The movie, apparently, was loosely based on real world sports agent Leigh Steinberg. After years of alcoholism, Mr. Steinberg has filed for bankruptcy protection in California. Mr. Steinberg bears little resemblance to our Massachusetts bankruptcy clients – he owes $1.4 million in back rent for a Newport Beach office, and $450,000 to a former NFL player. On the other hand, his income is $3,583 per month, or $43,000 per year, he drives a 2001 Ford SUV and he has $50,000 in credit card debt. Many of our clients have some of these characteristics, including an illness that sent them into an economic downward spiral.
While US statistics show that over 40% of bankruptcies are as a result of medical bills, we don’t see that in Massachusetts. Indeed, in a 2003 study by UC David professor Ning Zhu showed that personal bankruptcy was directly correlated with oversized mortgages, car loans and credit card balances. On the other hand, illness related, beyond addictions such as alcoholism, clearly results in many folks loosing jobs, or being unable to work and care for family.
The media, and especially some of the vicious politicians and talk show hosts, point to uncontrolled spending. Indeed statistics show that about 15% of bankruptcies are as a result of this. We don’t see it that clearly. Very few folks come in needing bankruptcy protection after world wide cruises and gala parties. Sometimes we see folks who have mismanaged their financial affairs: buying a car that required too big of a payment; buying a house that is underwater financially and in need of repair; or, simply letting small credit card bills with high interest get out of control.
Divorce is supposedly the cause for 8% of personal bankruptcies. We see a lot of this. For example, often the parties cant divide the debt because neither one can get new financing on their own; then one spouse remains in the house and defaults, but has no income. Of course the bank comes after the other spouse. It happens with credit cards too. These bankruptcies are sometimes not avoidable, but sometimes, with different advice at the time of the divorce, the may be avoidable.
The biggest cause Massachusetts personal bankruptcy that we see is as a result of job loss. Nationally, the number is 22% of bankruptcies are as a result of job loss. This comes in many forms in Massachusetts. We see the folks who just can’t hold on to their homes with unemployment insurance. We see many folks who, following a job loss, go through their entire retirement savings (401ks and IRAs). Other folks borrow from family and friends for a period of time. This often takes a while, and then, when the job search fails to yield any significant result, they come in for a bankruptcy consultation.
Fortunately, Massachusetts bankruptcy gives you a “fresh start.” In most instances, if your home is paid up, you can keep it, thanks to the Massachusetts Homestead Law. You can discharge credit card debt, medical debt, personal loans, and even some taxes. Regardless of the cause for our clients’ bankruptcy, or for “Jerry Maguire’s,” the law can give incredible relief. Read our blog http://www.bostonbankruptcylawyerblog.com/ or call us for a free consultation at 617-227-7423.