The strong economy has kept personal bankruptcy filings down for over a decade. Since the dark days of the 2008 recession, bankruptcy filings first went on the decline and then flattened out around 2016 and later.
Now, there’s every indication that recent economic unrest — especially that related to the tumble the stock market has taken in early 2020 — could drive personal bankruptcy rates higher again.
Here are the factors that are influencing the increase:
1. Many people who suffered financial losses in 2008 have not recovered
A lot of those same people may experience greater-than-average fallout from the worldwide economic changes. They may never have truly bounced back financially from their earlier bankruptcy. Now, more than a decade later, those same people may find themselves in a position where they have to file for bankruptcy yet again.
2. Medical debt is still soaring out of control
Even well-heeled consumers can have a hard time handling the debt from a major medical event in their family. On the cusp of a recession, they may find themselves choosing between paying for their mortgage and paying those bills — and the bills are going to be dropped.
3. Relief for farmers has been made more widely available
Chapter 12 bankruptcies are also on the rise, no doubt thanks to the Family Farmer Relief Act. It raised the debt limits family farmers can have and use this version of bankruptcy for relief to $10 million — more than double the $4.3 million they were allowed before the Act.
4. Wider availability for Chapter 11 protections for small businesses
The Small Business Reorganization Act went into effect early this year, shortening the bankruptcy process for small companies that need Chapter 11 protections.
If you’re feeling overwhelmed with your debts, bankruptcy is a viable option that can provide real relief. Find out more about your options as soon as practical.