Statistics Show That 38-Years Old + Debt Trouble = Hard To Avoid Bankruptcy

Another noteworthy observation, aside from the average age of a bankruptcy filer, is that the bulk of them file jointly. This means they are married or living in a common-law relationship.

To some, it may come as a bit of a surprise that the age of the average bankruptcy filer is 38. But this makes a lot of sense, especially when you factor in that they file jointly with their spouse.

Children & Debt Trouble

At that age, a lot of borrowers have children. As the children grow, so do their interests and material wants (ever notice how clothes don't get any cheaper?). As well, activities that children seem to enjoy also cost a lot more than when they were, say, toddlers.

As such, a lot of debt trouble will stem from the fact that children are getting older and getting into more diverse activities. Combine that with the individual life stage (well, their financial stage to be more precise) and we see how the average 38-year old gets into debt trouble so easily. It's the perfect storm.

Other Debt Obligations

As mid-life happens, many people turn from being borrowers to debt eliminators and, gradually, wealth accumulators. However, if that debt is too substantial (the costs of building a home, raising a family, providing for loves ones and so on), bankruptcy ends up being a wise and simple solution.

Other debt obligations that can impact whether our 38-year old files for bankruptcy can include educational costs and health care, the latter of which can, by itself, push many people into bankruptcy. Again, as people shift from one financial stage to another, problematic areas in the previous stage carry over to the new stage and impede progress.

And when you add a reduction of income to the mix...

Impact of Loss of Income

Given the state of today's economy, nearly one in every ten peole will experience a period of unemployment. That means single-earning households or households with a tremendous debt burden will suffer substantially during periods of reduced income.

Unfortunately, children will still need clothes on their back and feeding a family (especially with children) makes the bankruptcy decision something of a "no brainer." Having all unsecured credit debt wiped off the list of financial obligations can go a long way, especially when you consider that the average debt level is substantial enough to eat up one wage-earner's full after-tax salary.

Can You Avoid Bankruptcy If You Are 38 With Debt Trouble?

Of course, the question becomes whether people in these types of situations can avoid bankruptcy at all. And of course, it is definitely possible. But it needs to be something that people make a priority prior to the loss or reduction of income.

Focusing on Debt Management during the "good times" is not only positive financial planning and management, but it allows many to weather those financial storms that contribute to rising bankruptcy filings.

Married individuals who feel that their best debt elimination plan involves Chapter 7 bankruptcy solely for themselves should understand beforehand that their spouse will get dragged into their bankruptcy filing. This <b>does not mean </b>that their spouse will have become a joint filer. Instead, if this is the debt elimination plan of choice, the individual, married filer should know that their spouse will need to provide the following:

• The non-filing spouse will need to reveal all of their own creditor details. This will involve revealing current credit card balances, repayment terms, rates charged, and so on.
• The non-filing spouse will also have to reveal all sources of income. Even though this spouse is not a joint filer, he or she will still have to provide income details so that the bankruptcy court and ascertain household income to determine the legitimacy of the Chapter 7 filing.
• The non-filing spouse needs to disclose all of his or her assets. This means that if the filing spouse or even the non-filing spouse felt that assets in the non-filing spouse's name would not be subject to scrutiny, he or she was wrong. All assets will be disclosed and reviewed as part of the filing spouse's bankruptcy proceeding.
• The non-filing spouse will also have to submit a budget. Whether or not the non-filing spouse feels that chapter 7 bankruptcy is an appropriate debt management plan for the household, his or her full budget will be revealed to the bankruptcy courts and scrutinized.

Essentially, even if spouses are not filing jointly (i.e. one spouse is filing for Chapter 7 bankruptcy individually), both spouses will be subject to similar scrutiny by the Bankruptcy Courts. As such, married people who feel that Chapter 7 bankruptcy could serve as an adequate debt elimination plan for their own individual debt trouble need to understand the full ramifications of their intended actions.

There was a time when I had more than $55,000 in unsecured debt. Through some tough decisions and two years of big sacrifices, I managed to erode that debt and avoid the one thing that scared the daylights out of me: Chapter 7 bankruptcy (or the Canadian equivalent, anyway).

In retrospect, the two years of sacrifice really flew by rather quickly. Twenty four months really isn't that long and luckily, some of my investments also did well enough that I didn't have to realy "repay" the full $55,000.

However, if my debt problems had pushed me into Chapter 7 bankruptcy, I imagine my life would be a little different today. Aside from all of the well-covered downsides to Chapter 7 bankruptcy that I write about quite regularly, here are a couple more:

- I wouldn't own my own home today. Granted, it's not the estate I "want" but it is quite cozy and I live in a great neighborhood, so complaining about it is more like whining.
- My credit score would not be as healthy as it is today.
- I wouldn't have the great sense of pride that I have after achieving what was once an impossible goal.

On the other hand, had I filed for Chapter 7 bankruptcy, I might be enjoying some of the following luxuries today:

- Greater savings. Had I not exhausted all of my savings at the peak of the market, I would be much farther ahead today. Since I would have had no debt to repay, I could have invested heavily over the past 24 months, allowing myself to reap the rewards of dollar cost averaging. Quite possibly, I would not have saved the $55,000 I repaid, but even if I had managed to put aside $25,000 during those years when I had no debt, I would be that much wealthier today.
- I would have taken a couple more holidays over the past few years. Without question, repaying $55,000 in debt takes a great deal of resources and, again, sacrifices. Had I opted for Chapter 7 bankruptcy, I would not have had to sacrifice those annual cruise vacations. Had I opted for Chapter 7 bankruptcy, I would have enjoyed at least one cruise per year... period!  
- Had I filed Chapter 7 Bankruptcy, I would have purchased a new, better computer. I'm still using the same dinosaur, in fact!  

Hmm... I'd have enjoyed a few more things had I filed Chapter 7 bankruptcy. But that's the thing. Just because I had debt problems (because of all the things I purchased, I seem to recall) I had to deliberate filing for that dreaded Chapter 7 bankruptcy. Had I done that, I would probably have more "things." But that's about it.

In hindsight, I'm glad I developed my little debt management program. I'm glad I held out and fought to avoid the "B word." I'm glad (okay, surprised) I managed to get through it all. Not only do I get to "brag" to myself about my achievement, but I'm a lot more aware of money and am much more careful with it. That ignorance, after all, is what led to my debt problems in the first place.

Borrowers with credit card debt problems essentially have three basic options when it comes to credit card debt assistance. We will start with the most devastating and permanent option -- Bankruptcy under Chapter 7 -- then look at Debt Settlement, and finish up with debt management systems.

Chapter 7 Bankruptcy
When people need credit card debt assistance, they often feel that Chapter 7 bankruptcy is the best way to deal with their debt problem. Bankruptcy wipes out all unsecured debt, after all. And if there are few or no assets to liquidate, the borrower does not have a whole lot to lose.

However, Chapter 7 Bankruptcy does have a permanent and devastating impact to a borrower's ability to obtain credit in the future. Therefore, when borrowers believe that they will not need credit for up to a decade to purchase a new home or replace their existing vehicle, then this is not a problem. Also, if borrowers do not believe they will ever run their own business and "grow" that business, then Chapter 7 should be fine.

But if borrowers believe they could have an entrepreneurial itch in the near future, if they will not need any personal credit and if they are fine with paying higher insurance premiums, then Chapter 7 bankruptcy is not the same as credit card debt assistance.

Debt Settlement Options
Perhaps the truest form of credit card debt assistance is debt settlement. The fact is that debt settlement works almost exclusively with credit card debt -- borrowers don't normally arrange a debt settlement for other unsecured loans and definitely do not make such arrangements when it comes to past due mortgage payments or secured car payments (the creditor will almost certainly exercise their rights on the security and liquidate the assets to repay the debt.

The way debt settlement works is that the borrower negotiates a reduced principal amount on the money they owe (again, usually on their credit cards). This reduction typically amounts to $0.35 to $0.70 for every dollar owed and can be negotiated by the borrower or an agent appointed by the borrower.

The biggest pitfall to debt settlement is that the borrower's credit history will take a hit. The result will still be a written off account, but it will show as settled (borrowers who uphold their end of the bargain will also receive a letter confirming this) rather than a straight write off or written off due to bankruptcy.

However, if borrowers believes that they will need access to credit, debt settlement is not an ideal solution. Instead, borrowers should look at arranging their own debt management system.

Debt Management System
Although establishing a debt management system is not exactly credit card debt assistance, it is one way to improve credit and eliminate credit card debt. As well, a debt management system will not eliminate the credit card balance the way Chapter 7 Bankruptcy will, not will it reduce the amount of debt outstanding the way debt settlement will, it does provide some clear benefits for the borrower who is able to maintain a debt management system.

Some of the benefits include re-establishing credit completely. Although a few slow payments will obviously reduce the borrower's credit score, as the debt repayment program is maintained, that score will return to good standing. This is because there will be no "written off" amount, unlike Chapter 7 bankruptcy and debt settlement alternatives.

Unlike other credit card debt assistance options, establishing and putting a debt management system in place requires little interaction with creditors. This means the borrower's finances are kept private and do not come under the scrutiny of any third-party. However, a debt management system requires some work and effort on the borrower's part, as well as dedication.