PRELIMINARY REPORT
Consumer Bankruptcy
Bankruptcy Debtor Survey

April 1997

Copyright © 1997, Visa U.S.A. Inc.

With personal bankruptcy filings at record levels and a generally expanding economy, Visa has undertaken this study to help explain the causes of bankruptcy and the impact of the process on individual filers. Through this and further study, Visa hopes to generate recommendations that will create a better balance between debtor and creditor rights. This preliminary report provides highlights of the results of the study.

Methodology

This study sought to survey debtors who have filed for bankruptcy during the past twelve months. It surveyed 50,000 individuals who had filed for bankruptcy during the previous 12 month period.

The questionnaire was devised by Visa staff and the survey was conducted by an independent consulting firm. It contained 21 multiple choice or Yes/No questions and three open-ended questions.

Respondents were informed in writing that they were under no obligation to respond to the questionnaire. In fact, the identity of the respondents is limited to their geographic location. The questions were developed to extract information regarding the causes of the individual’s bankruptcy filing, evaluate the debtor’s perspective on the bankruptcy process and provide insight on their post-bankruptcy financial health.

The survey was sent to debtors in November 1996 with more than 3,500 responses received by the end of December.

Preliminary Results

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Nearly 60 percent said that their financial troubles began more than one year prior to their bankruptcy filing. In fact, 19 percent stated their financial trouble began 19-24 months prior to their bankruptcy filing and an additional 10.5 percent stated it occurred between two and three years prior to their bankruptcy filing.

Only 44.5 percent said they sought professional debt counseling prior to their bankruptcy filing.

Many filers, 63.6 percent, relied on attorneys to choose which chapter they chose to file and 7.2 percent cited reliance upon a friend or family member.

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A startling 66.4 percent found the bankruptcy process an easy one and nearly one third, 26.5 percent, indicated they would consider filing bankruptcy again. Additionally, 11.1 percent had filed more than one bankruptcy case. Of that, 8.6 percent had filed twice with one respondent citing a maximum of 12 filings.

 

 

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With regard to life after bankruptcy, 80 percent of respondents stated that new credit was hard to obtain. Only 88.9 percent did not have any unsecured (credit card, personal loans) given to them after the bankruptcy was filed. While 54.1 percent reaffirmed debts, 84 percent of filers did not reaffirm any credit card debt that allowed them to keep their credit card.

 

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Overall, 30.1 percent of filers were between the ages of 26-35 and 41.4 percent were ages 36-50.

 

 

 

Immediate Causes

Image Many major causes of the bankruptcy filing were identified although one immediate cause for the bankruptcy filing came through more clearly than any other. Nearly 49 percent of the respondents reported that the "last straw" was one or more of the collection tactics creditors used to collect what was owed them.

Other major "last straw" reasons cited were medical, divorce, taxes, litigation and unemployment as referenced in the chart above. It was not possible to determine whether the litigation outlined was related to collection of an outstanding debt–in which case it could be considered a collection tactic–or whether it included unrelated litigation that had, or would have had, a significant financial impact on the respondents.

These collection tactics included:

  • repossession, 6.7%
  • wage garnishment, 6.8%
  • foreclosure, 5.8%
  • unspecified "tactics", 29.6%

Regional Statistics

While the national information is intriguing, regional information has also been analyzed. The results of the regional statistics are included in Appendix A.

Final report due

The survey also explored additional information that is not included in this preliminary report. Some of those topics are:
  • main causes of the bankruptcy filing;
  • how filers learned about bankruptcy;
  • employment status at time of bankruptcy; and
  • what other solutions they advised would have kept them from filing bankruptcy.

The complete results and detailed analysis will be available at ABI World in July 1997 or from Visa by calling (800) 922-8277.


APPENDIX A

Regional Breakdown (By Percentage)
South (West) South (East) Pacific Northeast North Central West North Central East Mountain
1. Did you find filing bankruptcy an easy process?
Yes: 63.8 63.0 66.9 70.5 64.0 69.9 67.0
No: 36.2 37.0 33.1 29.5 36.0 30.1 33.0

2. Have you filed more than one bankruptcy case?
Yes: 11.7 11.7 11.5 8.7 10.2 12.6 9.0
No: 88.3 88.3 88.5 91.3 89.8 87.4 91.0

If yes, how many?
1: 0.6 0.6 0.8 0.0 1.0 1.0 0.0
2: 9.9 8.3 9.5 6.1 8.3 9.4 8.0
Avg: 2.0 2.2 2.1 2.6 2.0 2.1 2.2
Max: 3.0 5.0 12.0 10.0 3.0 4.0 4.0

3. Would you consider filing again?
Yes: 31.0 29.4 25.2 25.2 21.9 23.6 24.6
No: 69.0 70.6 74.8 74.8 78.1 76.4 75.4

4. Did you reaffirm any credit card debts that allowed you to keep your credit card?
Yes: 16.3 13.4 20.7 14.9 13.3 14.7 15.0
No: 83.7 86.6 79.3 85.1 86.7 85.3 85.0

5. Did you seek professional debt counseling prior to considering bankruptcy?
Yes: 44.2 44.3 49.7 42.4 46.8 35.5 48.7
No: 55.8 55.7 50.3 57.6 53.2 64.5 51.3

6. What was the "last straw" that led to your bankruptcy filing?
Repossession: 8.9 8.4 5.4 5.9 6.8 6.1 3.5
Litigation: 5.2 4.7 4.6 5.7 5.2 5.5 5.0
Medical: 11.2 11.1 9.1 9.0 12.8 13.4 11.8
Taxes: 5.9 8.3 5.5 6.6 5.8 3.5 4.9
Foreclosure: 5.4 6.9 5.7 7.4 3.3 5.2 2.5
Divorce: 7.5 7.7 6.7 7.0 8.3 6.6 7.3
Wage Levy: 5.7 6.3 7.4 5.6 9.3 6.8 9.3
Unemployment: 11.5 10.2 11.1 12.6 13.1 7.8 10.8
Collector Harassment: 29.4 29.5 28.5 30.0 31.3 31.3 28.2
Other: 8.8 8.9 12.3 11.1 11.5 9.9 12.1

7. Age of Petitioner (Could answer more than one "Joint Filings")
18-25: 8.6 8.7 7.3 4.8 14.6 11.5 12.5
26-35: 26.5 31.9 28.6 30.6 28.3 34.2 27.5
36-50: 42.2 40.2 40.9 44.6 42.4 41.0 38.5
50-65: 18.3 15.6 19.1 15.4 14.1 11.9 17.5
65+: 4.7 4.3 5.2 4.3 1.5 3.3 5.0

REGIONAL DEFINITIONS

Mountain

Arizona

Colorado
Idaho
Montana
New Mexico
Utah

North Central (East)

Illinois
Indiana
Michigan
Ohio
Wisconsin

North Central (West)

Iowa
Kansas
Minnesota
Missouri
North Dakota
Nebraska
South Dakota

Northeast

Connecticut
Delaware
Massachusetts
Maine
New Hampshire
New Jersey
New York
Pennsylvania
Rhode Island
Vermont

Pacific

Alaska
California
Hawaii
Nevada
Oregon
Washington

South (East)

District of Columbia
Florida
Georgia
Kentucky
Maryland
North Carolina
South Carolina
Tennessee
Virginia
West Virginia
Wyoming

South (West)

Alabama
Arkansas
Louisiana
Mississippi
Oklahoma
Texas