Bankruptcy Filings at a 10-Year Low: Will Rates Rise Again?

According to a recent report from Bloomberg BNA, bankruptcy filings have reached a 10-year low. With bankruptcy rates falling again during the month of September, the past year period represents a “10-year low for any 12-month period,” based on data from the Administrative Office of the U.S. Courts.
In total, bankruptcy filings were down by about 1.8% this September in comparison with filings the previous year. There were a total of 790,830 bankruptcy filings as of this September, a number that is several thousand filings lower than the 805,580 figure from the end of September 2016. In general, bankruptcy filings have been at a general low since 2011, but were are continuing to see a decline. However, according to the article, the fact that we have reached a bankruptcy filing low suggests that we may again see an upturn in consumer bankruptcy filing rates, as well as business filings.
Numbers are Low, but the Numbers are Still High
Even though bankruptcy filing rates have reached a decade low, this does not mean that consumers are not struggling with debt. According to Bruce A. Markell, a bankruptcy law professor at Northwestern University’s Pritzker School of Law in Chicago, the numbers are actually still relatively high compared to periods in U.S. history in which consumers are thriving. As Markell explained, “the numbers indicate that many Americans are still in precarious financial health—even though the filings are down,” given that “767,000 or so filings still represent a lot of financial pain for consumers.”
In addition, the rate of decline has also slowed—while bankruptcy filings are continuing to decrease, they are not doing so in large numbers. According to Christopher Bradley, a law professor at the University of Kentucky College of Law, “the overall decline is very small from the year ending September 30, 2016, which suggests that the economy remains largely in the same place.”
More than 96% of the bankruptcy filings in the last 12-month period were consumer debt bankruptcy cases. For the most part, consumer bankruptcies are Chapter 7 bankruptcies or Chapter 13 bankruptcies. In certain cases, such as those in which consumers have too much debt to file for Chapter 7 or Chapter 13 bankruptcy, the consumer may end up filing for Chapter 11 bankruptcy.
Rising Interest Rates Could Lead to More Consumer Bankruptcy Filings
In addition to the fact that the 10-year bankruptcy filing low is not, all things considered, a low number more generally, Markell went on to articulate how the current economic climate also suggests that consumer bankruptcy rates could be likely to rise again quickly, and in large numbers. What would lead to a rise in consumer bankruptcy rates? In short, rising interest rates.
As Markell explained, “the slowing of the rate of decline concerns me if, as most think may happen, interest rates start to rise.” To be clear, “that will result in many more filings—both consumer and business.”
Contact an Oak Park Bankruptcy Attorney
Do you have questions about filing for consumer bankruptcy? An experienced Oak Park bankruptcy lawyer can discuss your situation with you today. Contact the Emerson Law Firm to learn more about the services we provide to consumers who are struggling with debt.
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