bankruptcy vs. divorce (No debate pls)

[dennis99ss]

I heard a speech that indicated there is now a higher chance that a middle class family will file for bankruptcy than file for divorce. Has anyone heard this, and if so, is there any data to support it.

 

[MHopkins2]

I haven't heard anything about it, but seriously doubt it, given the divorce rate.

 

[mum4jenn]

I would believe it. A few years ago I had some business at a room close to where they hold bankruptcy court and I peaked in the courtroom and there were Dozens of people in there. I asked to deputy about it and he said the court was packed almost every day like that. And we are a pretty smalll area(100,000)

 

[TigerBear]

Descriptive statistics really can be manipulated. If you consider how many single parent families there are (and that they have a zero percent chance of filing for divorce today), it may be possible. I doubt it though.

 

[Toby'sFriend]

I've never heard that either but it honestly wouldn't surprise me.

 

[KarenC]

This was the first google result I got when I searched on Edwards, bankruptcy and divorce.

http://mentalspace.ranters.net/quiggin/archives/001189.html

In the year ending March 2003, more Americans went bankrupt than got divorced. There were 1.6 million bankruptcies in the year, about 40 per cent of which involved couples, implying around 2.2 million people going bankrupt. There were around 1.0 million divorces, or about 2.0 million people getting divorced. This (or maybe the year before, the divorce stats are a bit fuzzy) is the first time bankruptcies have exceeded divorces, at least since the Depression. The increase in bankruptcy has been exceptionally rapid. As recently as 1985, there were only 300 000 personal bankruptcies a year.

 

[dennis99ss]

I was just wondering if there was some backup for it, as I would have thought divorce was higher. I guess its good that divorce didn't win, but bad that bankruptcies are high, yada yada yada. I was wondering where he came up with the numbers.

 

[danacara]

Wow, that blows me away. SO many personal bankruptcies. I also didn't realize until last month how different the American credit system is than those of other countries. The French don't even have credit cards, per se - just debit cards and cards similar to Amex, because they are seeking to avoid these levels of personal bankruptcy. Wow.

 

[TigerBear]

I'm blown away as well. Any economists on the board willing to speculate how this is affecting our economy?

 

[arminnie]

Originally posted by TigerBear
I'm blown away as well. Any economists on the board willing to speculate how this is affecting our economy?

I'm not an economist but I did stay at a Holiday Inn Express .....

I worked for Visa International - the parent company of all of the Visa cards worldwide for many years. The % of losses to both fraud and bankruptcy is actually fairly small. I don't remember the number - I used to get all of those worldwide stats send to me quarterly. If I did have them I couldn't post it anyway as it's confidential.

But it does affect your interest rates if you don't pay off your balance each month. Banks that issue Visa cards can fairly easily peg the interest rate to your individual credit risk but the department stores and other private label cards usually just have one huge rate like 21 or 23%.

Fifteen years ago it was fairly hard to get a Visa or MC if you did not have very good credit. Several banks like Providian and Capitol One entered the market place and made a lot of money by offering credit to sub-prime borrowers at very high rates. They knew they were going to have more losses but they made up for it with extremely high interest rates and charges.

Some of the sub-prime CC issuers have had a tough time of it but I don't know of any who have gone under.

 

[phamton]

I can see how this might be possible. Let's say the divorce rate is 50 %. That doesn't mean that half of all people will get a divorce in that year only that half of marriages will end in divorce sometime during the many years of marriage.

So let's take 10 couples as an example:
Couple #1 divorces in 1996
Couple #2 divorces in 1998
Couple #3 divorces in 2000
Couple #4 divorces in 2002
Couple #5 divorces in 2004
Couples #6-10 never divorce

Now let's take these same 10 couples:
Couple #6 declares bankruptcy (counts as 2 people declaring bankruptcy) in 2004
So in 2004, two people have declared bankruptcy but only 1 divorce occurred that year.