Why are Consumer Bankruptcy Filings on the Decline?

For many Oak Park residents, learning that a friend or family member has made the decision to file for consumer bankruptcy is interpreted as a sign of economic struggle. When debt becomes overwhelming, consumers may file for Chapter 7 bankruptcy if they can pass the “means test,” or for Chapter 13 bankruptcy if they are able to stick to a repayment plan that still permits a discharge of debts once the multi-year repayment plan period ends. In other words, hearing that people are filing for bankruptcy typically is construed as a signal that the bankruptcy filer is having financial difficulties. Accordingly, learning that fewer Americans are filing for Chapter 7 or Chapter 13 bankruptcy often is construed as a sign of financial improvement.


However, according to a recent article in MarketWatch, a decline in bankruptcy filings might not always be a good thing.


Lowest Bankruptcy Filing Rates in a Decade


According to the article, U.S. Supreme Court Chief Justice John Roberts recently issued a report that indicates “corporate and consumer bankruptcy filing rates are at their lowest point in about a decade.” Approximately 10 years ago, at the recent height of consumer bankruptcy filings in the Great Recession, there were 1.6 million bankruptcy petitions. Most of those filings were personal bankruptcy cases, accounting for 1.53 million or nearly 96% of the filings.

Currently, consumer bankruptcy filings are down significantly. While consumer bankruptcy cases still accounted for approximately 97% of the filings, there were only about 770,000 bankruptcy petitions filed. According to Chief Justice Roberts, “bankruptcy petitions haven’t been so low since 2007.” However, the decline in personal bankruptcy filings might not necessarily be a sign of improved financial health. The article intimates that a lack of consumer bankruptcy filings actually could signal bigger financial problems in individual households.


Bankruptcy Costs and Lack of Assets Could be Reasons for Fewer Filings


Why would fewer bankruptcy filings signal financial distress among consumers? While the premise might seem odd, the article explains that “people may not be filing for bankruptcy because it’s too expensive to do so, and they might have too few assets to protect.” In other words, it is possible that more people are avoiding filing for bankruptcy because they can not afford the filing fees, and for others, they may have few to no assets, making bankruptcy protection seem moot.


As the article explains, people tend to file for bankruptcy when they do have assets to protect, and when they see a financial future for themselves.

At the same time, other consumer protection advocates offer alternative explanations that do in fact signal stronger financial health among consumers. For example, increased healthcare coverage could mean that fewer people have extensive medical bills necessitating bankruptcy, and more mortgage servicers are working out alternatives for homeowners who are behind on their home loans.


Contact an Oak Park Bankruptcy Lawyer

Do you have questions about filing for bankruptcy or inquiries about how bankruptcy could benefit you? An experienced Oak Park bankruptcy attorney can assist you. Contact the Emerson Law Firm for more information.





See Related Blog Posts:


Recent Bankruptcy Case Questions Constructive Fraudulent Transfers





Learning About Fraudulent Conveyances in Personal Bankruptcy

Comments

Post a Comment

Popular posts from this blog

Phantom Debt Collection Scams on the Rise in Illinois

Have you been contacted by a person claiming to be a debt collector who is seeking to recover a debt you allegedly owe? If so, you are not alone. According to a recent report from CBS Chicago , such parties claiming to be debt collectors are on the rise, and they are scamming Chicago-area residents. These alleged debt collectors are part of schemes known as “phantom debt collection scams,” since they involve the attempt to collect on a debt that the consumer does not actually owe. How can you avoid becoming a victim in a debt-collection scam ? What should you do if you have been targeted by a fake debt collector? How Do Phantom Debt Collection Scams Work? Now, you might be thinking to yourself: I would never agree to make payment on a debt that I did not owe. But the scam is not always that simple. Parties at the center of debt-collection scams often target consumers who do actually owe debts (to someone or to some entity), and they prey on the fact that these c...
Read more

Payday Lending and Predatory Lenders in Illinois

If you are in substantial debt in the Chicago area and are living in a paycheck-to-paycheck cycle, you may have taken out a payday loan to make ends meet. While payday lending is illegal in a number of states due to the predatory nature of these loans, it remains legal in Illinois. As a result, many debtors in the state have used payday lenders, and far too many of those borrowers cannot repay what they owe. According to a recent article from Progress Illinois , consumers have filed complaints about payday lenders in the state, illuminating a need for federal rules that address harmful lending practices . Predatory Payday Lenders and Protections for Consumers Due to the perceived predatory nature of payday loans, twelve states in the country have banned these lenders from operating completely, according to a fact sheet from loans.org . The states that currently have laws prohibiting payday lenders from operating include Arkansas, Arizona, Connecticut, Georgia, Mary...
Read more

New Information on Debts That Bankruptcy Cannot Discharge

If you are thinking about filing for bankruptcy in the Oak Park area, it is important to know that certain kinds of debts cannot be discharged in a bankruptcy case. Under U.S. bankruptcy law, these are known as non-dischargeable debts, or exceptions to discharge. There are certain types of debts that have long been identified clearly as non-dischargeable debts, while there are misconceptions about other types of debts that may or may not be dischargeable. As an article in CNBC discusses, the U.S. Supreme Court recently issued a ruling in the case of Bartenwerfer v. Buckley , which clarifies that debts incurred due to another party’s fraud cannot be discharged in an individual’s bankruptcy case. Our Oak Park bankruptcy attorneys can explain the Court’s recent ruling and provide you with additional information on dischargeable and non-dischargeable debts. Supreme Court Says Debt Incurred Due to Another’s Fraud is Non-Dischargeable The recent Bartenwerfer case involved a debtor attempti...
Read more