Consumer Credit Issues

27 Dec Will Bankruptcy Filings Increase In 2013?

ouija boardBankruptcy filings have been down in the last year. In theory that's a good thing but that is not necessarily all good news. And it certainly isn't good news for those of us in the business of filing bankruptcies! If you ask 10 bankruptcy lawyers what filing volume will look in the future, you'll get 11 opinions and 2 fights. So take what I have to say with a hearty grain of salt. My theory about bankruptcy filings is essentially this: People and businesses need to be taking risk for our economy to grow -- and also for bankruptcies to increase. It's a simple idea which we bankruptcy professionals hope doesn't catch on for long -- If you don't accumulate debt, you probably won't go bankrupt someday. Shocking, I know. Don't get me wrong. There will always be a "background hum" of bankruptcy filings, even if almost no one borrowed money ever again. You can end up owing money to someone through unpaid bills (like medical care or rent), or through your negligence (like a car accident), or breaches of other business contracts. But the variation in the overall case volume -- the spike or the crater in the annual chart -- depends on consumers incurring debt and, ultimately, not being able to pay it back. Right now the overall economy is coming back and consumers are spending again. That's good news for the economy and for bankruptcy professionals. But it isn't coming back fast. Retails sales were reportedly lackluster during this holiday season. Banks have cut back on their credit card offerings to consumers. And most critically we are not yet seeing an expansion of consumer borrowing -- except in the student loan area -- yet. In other words, people are getting more comfortable spending money but they are not yet confident enough to borrow it.
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