In part two of our series on why there are rising numbers of middle-class Americans filing for bankruptcy, we discussed the impact of job losses and rising unemployment.  In the final part of this series we will discuss how our unsustainable personal debt level has conspired to push middle-class Americans into bankruptcy.

Part III – High Debt Levels Push Middle-Class Into Bankruptcy

During the boom years, the economy became fat off of the …

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In part one of our series about why the middle class is becoming more vulnerable to bankruptcy, we discussed the swelling numbers of Americans who have a college education and own homes filing bankruptcy.  In part two of this series, we will explore how the massive numbers of job losses and rising unemployment rate is pushing more middle-class Americans into Chapter 7 and Chapter 13 bankruptcy.

Part II – Job Losses Become …

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When we think of Middle Class America we think of stability, nice jobs, good neighbors and stellar careers; but middle class America is in crisis.  Many are facing foreclosure and are filing bankruptcy despite their degrees, high salaries and symbols of stability. In this three part series we will explore how and why middle class Americans are getting hit worse by the recession than any other demographic in …

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… court dismissed the debtors’ repayment plan because it made special provisions for a “special class” of creditors. These special class creditors would receive their payments in full at the expense of the other creditors.

The bankruptcy case said:

“The debtors’ plan is a sixty-month plan with Hancock and HSB designated as “Special

Class Creditors” and thus classified separately from other unsecured creditors. The debtors’

payments under the plan to the trustee are $624 …

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… to pay for the toxic loans they are suffering under. What we need now is to hold the banking class accountable for signing millions of Americans up for unaffordable mortgages. We need to empower our bankruptcy system to modify these toxic mortgages so that homeowners can save their homes from foreclosure using our bankruptcy system.

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… salary.  Many analysts are reporting a “downward” trend of salaries amongst many in the middle-class who were making close to or even more than six figures.  Many of those individuals were sitting pretty three years ago only to find themselves nearly destitute as the foreclosure crisis picked up steam and devastated the housing industry.  In 2010 we may see more of those individuals seeking bankruptcy protection even after they’ve settled into lower income jobs.  In 2009 many …

… bankruptcy exemptions are high enough to protect the personal/intimate belongings of the average middle-class debtor during bankruptcy.

As far as credit card charges are concerned, most bankruptcy trustees will look at the past year of credit card purchases to determine if a debtor made credit card purchases without any intention or ability to repay the loan.  If the bankruptcy trustee determines that a debtor charged items to a credit card with no intention or ability to repay the …

… to create an affordable monthly repayment plan that will allow the debtor to maintain a typical middle-class lifestyle.  The debtor makes payments for 3 to 5 years and at the end of the term the debt that was not repaid is discharged.

To estimate your Chapter 13 bankruptcy monthly repayment amount, follow the formula below:

Determine your net monthly income and monthly expenses.  Your monthly net income is the money left after taxes and other pre-tax deductions are …

The Consumer Law & Policy blog has a very revealing article about a judge in Indiana that took it upon herself to give indigent debtors a choice–”pay up” or “go to jail.”

The blog writer provided the transcript of an exchange between the debtor and the judge:

The Court: “So we’re here today for you to explain what you’re going to do to pay this off.”

Mr. Button: …

Comment by Jayne Marshall: … War History class. How many other people won’t …

… personal bankruptcies in the country were related to medical problems and most of the people were middle-class and well-educated and had medical insurance.”

Many of those who are insured eventually face medical debt because their insurance policies don’t cover enough or they don’t cover what they expect it to cover. Even if someone has medical insurance they need to carefully review their insurance policy so that they understand what is actually covered by the policy. Many Americans …

… find comparable work paying a living wage. Many unemployed workers who formerly earned comfortable middle-class wages are now being forced to take part-time work or lower-wage full-time positions. You can imagine the consequences of these involuntary pay cuts. Once they find new employment (at a lower salary) many workers are unable to maintain their former lifestyles. And we’re not just talking about the inability to pay for private schooling for the kids or dine at fancy restaurants; many …

… environment is more dynamic that Europe and Asia.   It is because of bankruptcy that our working-class and middle-class can get a fresh start after a job loss or illness put them into debt.  There are countries that have no or very little bankruptcy protection for their citizens.  In those countries without bankruptcy, debts not only stay with your for life, they are often passed down to your children.  Bankruptcy is a progressive set of laws that prevents the debtor from being the …