Since the current American recession began in 2007, bankruptcy courts have been inundated by unprecedented caseloads. Who’s filing? It’s not who you might imagine.
Laura McCloud and Rachel Dwyer (The Sociological Quarterly, Winter 2011) analyzed bankruptcy records and found that the middle class is 2.4 times more likely to file for bankruptcy compared to lower income groups. Even more surprisingly, the upper class is also more likely to declare bankruptcy.
The authors claim that poor families are much less likely to seek debt relief through bankruptcy because they often cannot afford to pay the necessary legal fees. In addition, since the middle- and upper-class families are typically extended more credit than low income families, they are also more likely to use debt (say, by using a credit card) when faced with exorbitant medical bills, loss of income through unemployment, or the loss of a spouse.
These findings illustrate how bankruptcy laws are yet another way class inequalities are reproduced in contemporary American society. Since most poor families are unable to afford bankruptcy, they are perpetually saddled with debt (plus accruing interest) that they have little hope of paying off.