If you think that personal bankruptcy happens only to lower-income people — think again.
It’s true that some 60 percent of bankruptcy filers earn annual salaries of less than $30,000, according to Debt.org. But an increasing number of professionals filing for bankruptcy are likely to be upper middle class or even high-net-worth individuals, a trend that’s spiraled since the 2008 financial crisis due to investments gone wrong.
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Although there’s no concrete data on bankruptcy filings per profession, recent research findings, news reports and anecdotal evidence are shedding light on some of the professions more vulnerable to bankruptcy than others. One common point to all these careers: They tend to involve working solo or in small groups. (Experts also say that in some cases, filing for bankruptcy may be a better move than hanging on by a thread financially.)
Here are four of the most vulnerable professions:
Professional Athletes. They’re especially at risk for bankruptcy after they go into retirement, a paper published Monday by the National Bureau of Economic Research (NBER) found.
Most people over the course of their economic life cycle save when their income is high to provide for when their income is lower, such as during retirement. The NBER tested this pattern on players in the National Football League, whose income typically has a very large spike that usually lasts only a few years.
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By looking at data on all players drafted by NFL teams between 1996 and 2003, the researchers tested whether individuals had adequate savings by counting how many retired NFL players filed for bankruptcy. “Contrary to the life-cycle model predictions, we find that initial bankruptcy filings begin very soon after retirement and continue at a substantial rate through at least the first 12 years of retirement,” the academics from CalTech, the University of Washington and The George Washington University found.
By the time they’ve been retired for just two years, 78 percent of former NFL players have gone bankrupt or are under financial stress, according to a 2009 report from Sports Illustrated. Among the highest profile NFL players who have filed for bankruptcy are Dan Marino and Vince Young.
Among former players in the National Basketball Association (NBA), about 60 percent go broke within five years of retirement. Major League Baseball players have a similar fate. The main causes of financial stress are joblessness or divorce. Often they simply don’t know how to manage their money or hire the wrong people for the job.
Doctors. Physicians have been pushed increasingly into Chapter 11 bankruptcy these last several years, according to CNN Money.
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“Doctors blame shrinking insurance reimbursements, changing regulations, and the rising costs of malpractice insurance, drugs and other business necessities for making it harder to keep their practices afloat,” said CNN.
Celebrities. Singers, actors and reality stars share a fate similar to that of NFL players. Like athletes, high-profile performers typically earn large amounts of money very quickly. Though it may seem as if their good fortune will never end, they often make outrageous purchases or unwise investments when times are good — but then encounter super-short careers or years of unemployment between contracts.
Investment Professionals. The financial crisis took a toll on the finances of these workers for all the obvious reasons: When economic times are hard or when they make bad economic decisions, they’re subject to more hardship than most people.
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Bankruptcy attorney Jay Fleischman of Shaev and Fleischman told Investment News a year ago that he’s worked with many financial advisors, insurance professionals and certified public accountants who have filed for bankruptcy. In some cases they did so because their incomes took a dive due to the vagaries of the market or because of real estate catastrophes.
“The public thinks that personal bankruptcy is largely the providence of the middle class or lower middle class,” he said. “Over the last five to six years, that has been turned on its head.”
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