Understanding consumer debt and bankruptcy trends is a key part of understanding the overall health and well-being of the U.S. economy. These important economic indicators can be a bellwether of things to come, both good and bad – while also helping observers gain a clearer perspective on where we’ve been.
So, what consumer bankruptcy trends, statistics, and stories have we been keeping an eye on? As we prepare to wind down 2019 and look ahead to 2020, here are three personal bankruptcy trends to note:
Overall, Consumer Bankruptcy Filings Have Declined in Recent Years
Overall bankruptcy filings peaked in 2010, following the recession of the late aughts; since then, nonbusiness bankruptcies have been in decline for nearly a decade. Data from the United States Courts indicates that there were roughly 1.53 million nonbusiness bankruptcies in 2010, including both Chapter 7 and Chapter 13 filings; that total fell to 767,721 by 2017 (down from roughly 781,000 in 2016).
So, what factors may be behind these falling filings? On the one hand, it’s important to note that the overall health of the economy has rebounded in many key metrics since our last major economic downturn. As Market Watch points out, that extended “slide in bankruptcy petitions largely coincides with a historic nine-year bull run on Wall Street.” At the same time, reports have indicated that Americans have maintained a largely healthy rate of debt to income since the Great Recession.
It’s also important to factor in other changes, such as the passage of the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) in 2005. The CFPB recently released a report looking at consumer bankruptcy trends after BAPCPA, and found that this act substantially reduced the number of Chapter 7 filings – from about 75 percent of personal bankruptcies in 2001-2004, to 63 percent in 2015-2018.
Bankruptcy Rates Have Been Climbing in 2019
Could this long run of reduced bankruptcy filings be coming to an end? Some key reports are hinting at just that – but so far, they are just hints.
Chiefly, a 2019 report from the American Bankruptcy Institute (ABI) suggests that consumer bankruptcy filings are on track to increase notably for the first time in recent years. Reporting from the ABI indicates that total U.S. bankruptcy filings increased 3 percent in July 2019 from July 2018; consumer bankruptcy filings increased at the same 3 percent rate year-to-year, with 61,025 consumer filings in July 2019, up from 59,110 in July 2018. Consumer bankruptcies also rose about 5 percent month to month from June to July 2019 (from 58,003 to 61,025).
As the New York Post points out, if this trend continues, “this year’s overall total of [personal and business] bankruptcies is on pace to hit 796,000,” far exceeding last year’s totals.
At the same time, data from the ABI suggests that household debt is roughly $14 trillion, “which is $1 trillion more than the 2008 Great Recession peak,” as Yahoo News notes. As the Post points out, “credit card debt of $1 trillion also exceeds the 2008 peak,” which could make households more likely to turn to bankruptcy as a means of relief moving forward.
Older Americans and Young Adults May Be the Most Vulnerable
Trends suggest that older adults are facing bankruptcy at disproportionate rates, due to a number of complex factors – including lack of income, insufficient savings, and climbing healthcare costs. To wit, one significant research study published in 2018 found that there has been “a two-fold increase in the rate at which older Americans (age 65 and over) file for bankruptcy and an almost five-fold increase in the percentage of older persons in the U.S. bankruptcy system.” This report also found that, as of 2018, “the median senior bankruptcy filer enter[ed] bankruptcy with negative wealth of $17,390.”
This indicates that retirees and other older adults are currently entering bankruptcy at an outsized rate. Looking down the road, there are also some warning signs that young adults may be similarly vulnerable, largely due to the mounting problem of student loan debt.
A recent survey found that “32% of consumers filing for Chapter 7 bankruptcy carry student loan debt” to some degree. Other reports indicate that it is one of the primary sources of household debt, alongside credit cards, mortgages, and auto loans. Data suggests that total student loan debt in the U.S. sits around $1.56 trillion as of early 2019. 44.7 million Americans are living with student loan debt, and more than 11% of student loans are 90 days delinquent or already in default. Extrapolating on current trends, one report suggests that “nearly 40% of borrowers may default on their student loans by 2023.”
Debt, Bankruptcy, Real Estate – They’re More Than Just Numbers
Getting a handle on all this data is one thing, but it’s something else entirely putting this knowledge into practice. If you’re looking for a Chicagoland law firm that understands the human side beneath all the stats and figures, the Gunderson Law Firm would be happy to help.
Our team of attorneys and staff are experienced and knowledgeable in the many elements that go into real estate and bankruptcy law in Chicagoland. Our professionals possess unparalleled expertise and insight, bolstered by years of experience and valuable long-term connections throughout Illinois’ real estate, finance, and insurance industries.
Above all else, we are committed to providing the advocacy you need without the attitude you don’t. If you have found other lawyers to be more about their egos than about your case, talk to Gunderson Law Firm. Our attorneys are not only highly knowledgeable and experienced, but very down-to-earth. We’re all about great representation and timely results, tailored to your unique circumstances.
Let our experts guide you through the legal process with ease! Drop us a line whenever you’re ready to keep the conversation going.