No one wants to file bankruptcy. While the social stigma has diminished over the years, filing bankruptcy is not like winning the lottery. In fact, for many, it is the sad recognition that they have lost the lottery. And today, there are many residents of Kentucky and across the nation who have lost the lottery.
Filing a Chapter 7 or Chapter 13 bankruptcy is the last link in a chain that may have been forged before they were born. Since the 1970s, income has been stagnating. Adjusting for inflation, there are many jobs that pay little more than a worker in the 1970s would have earned.
For many, the American Dream meant getting a job, buying a home and a car, raising a family, sending your children to college, and having the ability to retire. But because of the stagnant wages, many women had to enter the workforce to enable their families to maintain a middle-class lifestyle.
As repeated financial crisis have demonstrated, American workers are reaching the end of the line. They have tapped out second incomes from working women, home equity, credit cards, and many have no more resources to draw on.
When illness or layoffs cause a job loss, the downward spiral can quickly begin. If the illness causes significant medical bills, the prospect of a bankruptcy looms large. Other causes, like divorce, can also be catastrophic to your economic health.
If bankruptcies begin to increase again, it may say more about the economic health of the country than it does about personal responsibility.
Source: Bloomberg.com, "Americans on Wrong Side of Pay Gap Run Out of Means to Cope," Rich Miller and Michelle Jamrisko, December 30, 2013