Consumer Bankruptcies Down For November, Year
Bankruptcy filings in November were down 12 percent from November a year ago, according to the National Bankruptcy Research Center—but don’t start sounding the horn for economic stability just yet.
- Filings down 11 percent on the year after several years of increases
- Explanation for the drop unclear, disputed
- Chose attorney carefully if considering filing for bankruptcy
Do Fewer Bankruptcies Equal Less Debt?
Filings are down 11 percent overall compared to last year, appearing to slow or reverse a trend that had seen increased bankruptcies year by year since the economic collapse of 2008– bankruptcies rose 32 percent from 2008 to 2009, then another 9 percent from 2009 to 2010.
“The drop in consumer filings throughout the year reflects the continued deleveraging of the U.S. consumer after years of expanding consumer debt,” said Samuel J. Gerdano, executive director of the American Bankruptcy Institute, in a press release. “We anticipate that there will be less than 1.4 million overall consumer bankruptcy filings by year end.” Last year, over 1.5 million people filed.
Gerdano has an optimistic outlook, but his reasoning is not the only possible explanation for the drop. “It makes sense, but I’m not necessarily sure that’s the reason,” says California bankruptcy attorney Mark Markus. “People don’t always file bankruptcy in specific time frames. It could be a complete anomaly.”
Markus points out some other reasons filings might be dropping—for example, laws enacted in the last few years to slow the tide of foreclosures, as well as lenders not foreclosing on a house for other reasons, may delay the need for some people to declare bankruptcy. “The property might just sit there, and people may not feel the urgency to file,” he says.
Another, more pessimistic reason that filings might have dropped—people can’t afford it. “A lot of times, it is simply a matter of people not having sufficient income to sustain a bankruptcy case,” Markus says. Attorney fees can run in the thousands of dollars due to the intricacies involved, and certain types of filings require a consistent income. However, when wiping out five or six figures in debt, lawyer bills might be a small price to pay.
Is Bankruptcy Right For You?
“Bankruptcy can accomplish a lot of different things but there are a lot of things it can’t accomplish,” Markus says. “It’s going to be different for every person. It’s not a one size fits all scenario.”
The most common reasons for filing for personal bankruptcy, Markus says, are falling behind on mortgage payments, credit card debt and medical problems.
People facing intractable debt or other fiduciary disasters should consult with a bankruptcy attorney to go over their debts, assets, expenses and income to decide on the best path forward.
There are various types of bankruptcies, called “chapters.” The most common for individuals are:
- Chapter 7: A debtor’s non-exempt property is liquidated to pay off debts; some but not all debts remaining are then discharged.
- Chapter 13: A debtor protects his or her property by entering a three to five year program to pay off debts. Requires regular income.
Trust the Experts, Not the Internet
Markus urges those considering bankruptcy to seek out an attorney due to the complication and nuance of bankruptcy laws, as well as the potential lack of accuracy of online advice. “I spend so much time every week explaining to people about incorrect information they’ve gotten from the Internet,” the lawyer says. “Taken out of context it just leads to completely inaccurate conclusions.”
An experienced lawyer, however, can provide personalized, informed advice. “Any competent bankruptcy attorney is going to explain all the different options,” says Markus. “Debt consolidation, credit consolidation, whatever might be appropriate in their situation, including non-bankruptcy options.”
Don’t settle for any old lawyer who might not arrange the best outcome for your case. When deciding on an attorney, be sure to take into account:
- How long they have been practicing bankruptcy law
- What kind of peer reviews they receive on sites like Lawyers.com and Martindale.com
- The attorney’s volume of cases—beware of “bankruptcy mills”
- State bar records
- Testimonials from previous clients
“You need to research it like you’d research going to a doctor,” Markus says. “You want to be comfortable that you’re getting the right person.”
Find more resources at the Lawyers.com bankruptcy guide.
Aaron Kase is a news reporter for Lawyers.com.
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