College grads driving upward spike in bankruptcy filings
Our high school teachers always said that a college education was a sure fire way to ensure financial stability down the road but now there’s mounting evidence that no one is immune to financial disaster.
A new study found college graduates are the fastest growing group of consumers filing for bankruptcy in the nation. And Washington State is no exception.
In fact, when Seattle attorney, David Fuller started filing bankruptcy cases back in 2008, his clients were mostly people who had spent some time in college but not completed it. And it’s still the case that most people filing for bankruptcy fit this profile: Caucasian, with only a high school diploma and an annual income of less than $20,000 a year.
But since the start of the recession a few years ago, Fuller has seen a dramatic shift in the people who come to him, sinking in financial quick sand.
"I am seeing more college graduates. I’m seeing a wealthier clientele. Microsoft employees, higher-level Boeing employees. Bank employees with college degrees," he said.
Changes across the spectrum
What Fuller has experienced is true for bankruptcy attorneys all over the country. And there are lots of other pattern changes according to the study:
- Over 70 percent of debtors didn't graduate from college
- The majority of bankruptcy filers earn $40,000 a year or less
- Bankruptcy filers earning incomes above $60,000 increased their rate of filing by over 66 percent
- Asian American filings have doubled while Hispanic/Latino filings increased by over 33 percent
Leslie Linfield is Executive Director of the Institute, which puts consumers through a form of financial rehabilitation, including bankruptcy.
White collar recession
Linfield said these findings point to one larger message about the economic downturn:
"This said to me that this recession is a white collar recession. We weren’t seeing people in the manufacturing sector getting the pink slips. But this time around it was people working in the office park in the sky scrapers."
And bankruptcy lawyers report it’s not just college graduates they’re seeing more of, but professionals with high incomes and second homes who are seeking a financial lifeline.
As credit remains tight and unemployment stays high, Linfield said we will continue to see a growth in bankruptcy rates among wealthier, more educated households. But that’s likely to slow down as consumers reduce spending and get their credit in check.