Bankruptcy filings have been on the rise in recent years. During the last fiscal year, one federal district in Florida had the second highest number of bankruptcy filings in the country. Second only to Los Angeles, Florida’s Middle District recorded nearly 69,000 chapter 7, chapter 13 and chapter 11 bankruptcies last year.
Both of the districts that recorded the highest numbers of bankruptcies had nearly one percent of the population filing for bankruptcy between October 2009 and September 2010. That means that roughly one in every 100 people in the Tampa area filed for bankruptcy protection last year. So why did so many people need bankruptcy relief last year?
At first glance, the answer may seem obvious. Of course, the poor economy has led many to lose their jobs. With little or no income, bankruptcy sometimes becomes the only option. But many are speculating that job loss is not the only thing causing people to seek debt relief through bankruptcy.
Recently, many people have suggested that the “stigma” of bankruptcy is gone. For a long time, filing for bankruptcy was seen as “morally wrong.” Today, bankruptcy is viewed more like an important safety net. People who need the financial protection that bankruptcy offers are no longer as afraid to seek it out.
Another theory about the cause for the rising bankruptcy rates is the foreclosure crisis. Not only are people losing their homes because of financial instability, losing those homes causes more financial stress. Homeowners with equity in their homes know that the equity could be used to pay for emergency expenses if necessary. When those homeowners lose the property, they lose that equity. Suddenly, their financial backup plan is gone. While bankruptcy may not have seemed necessary before, people who lost their homes now need the security that bankruptcy can offer.
Source: The Florida Times-Union, “First Coast No. 2 in country for filing bankruptcy,” Kevin Turner, 12 Jan 2011