The Changing Face of Bankruptcy: New Pipitone Law Study Indicates More Middle Class Americans Filing for Bankruptcy Protection Around the Holidays

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The stigma and ignorance surrounding the type of people who file for bankruptcy is unfounded. This informal law firm analysis indicates the shifting demographic of the bankruptcy filer.

Who Files for Bankruptcy

The Changing Face of Bankruptcy

80% of bankruptcy clients I help are hard-working, middle-class homeowners.

The Holiday season means time with family, friends and big spending. Bankruptcy filings often increase after the holidays as some individuals spend more than they can afford and end up having to file for personal bankruptcy protection. But according to New York Bankruptcy Attorney Frank Pipitone, these cases are more the exception than the rule. “There are so many misconceptions about individuals who file for bankruptcy. Many people think those who file are lazy, irresponsible or high-stakes gamblers, when in fact, 80% of the bankruptcy clients I help are hard-working, middle-class homeowners. Despite popular thinking, bankruptcy is a middle-class phenomenon”

Pipitone is not alone in his assessment. Harvard Law School Professor Elizabeth Warren and her colleagues conducted a study on bankruptcy and found the data supported Pipitone’s claim. Warren and her team found that personal bankruptcy has become a largely middle-class phenomenon led by college graduates and homeowners.

In combing through his client’s files, Mr. Pipitone found that a random selection of ten previous bankruptcy clients included some startling data:

  •     Eight of the ten were homeowners
  •     Eight of the ten were employed
  •     Six of the eight that were employed had household income in excess of $75,000 with two exceeding $100,000
  •     Seven of the ten were married with children
  •     Six of the ten were current on their bills
  •     Six of the ten regularly gave to charitable organizations

Pipitone explains, “Personal bankruptcy isn’t for the “deadbeat.” That person has nothing to gain. It is the hard working, responsible, middle class family/individual that stands to gain from the bankruptcy process. The fresh start only helps someone who is still in the game. “I realized that the clients I profiled are not using bankruptcy as a “last resort.” They are conscious of their situation and they are being proactive in taking care of their financial hardship. Thanks to bankruptcy, they will not reach “game over.”

Pipitone goes on to say, “The most important thing I realized when I was looking at this information is that I could easily fit the profile of a bankruptcy filer. In actuality, everyone does and that is why the stigma attached to bankruptcy and the ignorant opinions about those who file need to change.”

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