Bankruptcy decline may be good for consumers

Is the decline in the number of bankruptcy filings a good sign for consumers?

A recent study from the American Bankruptcy Institute indicates a decline in the number of bankruptcies in the U.S. Total bankruptcy filings in the United States for August 2013 decreased 15 percent compared to the previous year, according to data provided by Epiq Systems, Inc. August bankruptcy filings totaled 88,902, down from the 104,471 filings registered in August 2012. Is this a good sign for consumers? Has the economy gotten better?

There are four primary reasons for the decline in personal bankruptcies. They are as follows:

1. Interest rates are lower and people are able to refinance their way out of financial trouble. This includes mortgage and credit card rates.

2. A large number of people have already filed so there are less people who have a short term need to file. There had been record filing rates for a number of years.

3. Consumers are having a more difficult time filing for bankruptcy because of a revised Bankruptcy Code. This difficult code implements an income test to bankruptcies. (This requires a more experienced bankruptcy attorney to help navigate the individual through the process)

4. The job market is a little bit better and the housing market has improved as well.

Bankruptcies are an individual choice. Some people without a great amount of debt have the need to file due to their individual circumstances. What may seem to be a fairly small amount of debt to one person is the difference between being able to pay your rent or not pay your rent for someone else.

Deciding to file for bankruptcy is a difficult choice to make — even if you are struggling to pay your bills on a monthly basis and find yourself overwhelmed with debt, you must still come to terms with the impact bankruptcy will have on your daily life. While it is an intimidating option to consider, bankruptcy may ultimately be beneficial if you wish to reduce your debts and build a healthy financial future for yourself.

FACTORS TO CONSIDER WHEN FILING

You must be honest with yourself and make sure you include all your debts when assessing your financial circumstances. Also, make note of factors that affect your debts, such as whether you have a co-signer on a loan or mortgage and find out if your debts are even eligible to be eliminated through filing for bankruptcy.

Bankruptcy may be your wisest option if you:

•Cannot budget yourself out of debt within the next five years

•Cannot pay more than the minimum payment on your credit card bills

•Have received letters or phone calls from collection agencies

•Have suffered a severe financial setback, either through losing your job or becoming seriously injured

•Do not have any co-signers who would be forced to pay off bills if you file to have dischargeable debts wiped

•Only have unsecured debts

The author is a bankruptcy attorney and has a practice on 26 Court Street in Brooklyn.

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