Consumer Bankruptcy Filings Remain High But Showing Signs of Slowing
If you are a resident of the Sacramento Metropolitan area you may be interested to know that Chapter 7 and Chapter 13 bankruptcy filings have slowed over the last month. Although these numbers may point to a possible sign of economic recovery, the numbers for 2010 as a whole remain at a five year high.
The number of individual households filing for bankruptcy dropped by 13% last month according to the Wall Street Journal. The United States saw 114,587 personal bankruptcy filings in November as whole. While these numbers are down significantly from October, the number of filings still remains 2.2% higher than this time last year. Analysts predict that approximately 1.6 million people will have filed for bankruptcy in 2010. This is the highest number of filings since Congress passed the bankruptcy reform law in 2005. Congress changed the bankruptcy code in 2005 in order to make it more difficult for individuals to qualify for Chapter 7 and eliminate their debts.
Some economists opine that the credit crisis which struck the nation along with the economic downturn pushed bankruptcy filings higher since individuals could no longer use new sources of credit to pay down existing debts and were forced into declaring bankruptcy. Nonetheless, job losses appear remain the driving force behind the flood of bankruptcy filings over the past few years. According to surveys taken by individuals enrolled in mandatory credit counseling classes, required as a prerequisite to filing for bankruptcy, 65% noted a reduction in income was the cause of their financial situation.
Since the economic downturn began in 2008 the Nation has seen a decrease in consumer spending. “When consumers pull back, two things happen, typically,” said the executive director of the Bankruptcy Institute. “The economy stalls, but longer term we do see a leveling off of and then perhaps a dip in consumer bankruptcy filings.” The reduction in filings is most likely attributed to individuals relying less on credit and ensuring they live within their economic means.
As a Sacramento Bankruptcy Attorney I am delighted to see that there may be early indications of an economic recovery in sight. This means that local families are able to pay their bills and focus their energy on more important matters rather than worrying about ways in which to manage or juggle their burdensome debts. Nonetheless, the decision to file for bankruptcy remains an economic one and should be carefully considered if you or someone you know is having difficulty meeting their financial obligations. Bankruptcy filings are often times a strategic process that should be planned with an individual who is knowledgeable on the law and the long term implications of the process.