What Explains the Rise in Personal Bankruptcy?
In recent months, the number of people needing bankruptcy has sharply increased from years prior. The stats include Memphis and the surrounding area, but also hold true in the rest of the United States.
What’s causing this problem, and is bankruptcy really the best solution?
The Rise in Bankruptcy by the Numbers
In 2023, personal bankruptcies rose by nearly 20%.
In March alone, Chapter 7 bankruptcy rose 13%. This is a type of bankruptcy that gets rid of unsecured debt, like credit card and medical bills. Chapter 7 also stops wage garnishment, lawsuits, and creditor harassment.
Chapter 13 bankruptcies increased even more sharply – up 24%. Chapter 13 involves setting up a payment plan and typically deals with assets like a home or a car. It stops foreclosure and repossession while also dealing with the same other debts and creditor problems as Chapter 7 above.
In particular, credit card debt, medical debt, and auto loans seem to be giving people a lot of trouble right now.
What’s Causing the Increase?
For a couple of years during the pandemic, many banks and courts put a moratorium on certain types of debt collection. As a result, we always expected a certain increase in bankruptcies once that moratorium ended. For example, with laws against eviction and foreclosure expiring and life returning to “normal,” a number of people now face housing insecurity who didn’t before.
However, this doesn’t explain the uptick entirely. As a result of COVID-19, the world faced supply chain shortages. People weren’t able to get products made or shipped as easily. This led to the highest inflation the United States has experienced in 40 years.
In response to that inflation, the Federal Reserve increased interest rates multiple times. This made life increasingly expensive for people who needed a new home or car for whatever reason.
And it also made refinancing difficult.
Refinancing doesn’t always work to save people from debt, but it can be a useful tool in the early stages of financial problems. Without that option, and with the cost of living stay high while wages remained the same, a lot of people fell into serious debt.
In addition, medical debt rose during Covid as well, as people sought treatment for Covid-related illnesses and side effects.
Needing Bankruptcy vs. Other Solutions
This rise in bankruptcy doesn’t surprise us. As a Memphis bankruptcy attorney who has served the people of Memphis for over 30 years, I’ve seen cases rise and fall based on the economy and world news. Even though we like to think we’ve moved on, Covid was a massive national event that continues to have long-term ramifications for our community.
And we’ve seen in our office how hard it can be to get out of debt right now. If you’re needing bankruptcy, you may want to try other solutions. But for the reasons we mentioned above, this can be really difficult.
Banks currently limit their refinancing options. Interest rates remain high. And creditors who weren’t allowed to pursue debts during the pandemic now have the freedom to do so. After two years of not being allowed to collect on debts, they might not offer as much flexibility as before.
Help to Get Out of Debt
All of these problems might put you in a really difficult situation. Perhaps you’ve been looking for solutions for a while now. You desperately need someone who will treat you with compassion and respect and give you the help you need.
That’s where we come in. Our attorneys offer a free consultation. We will meet with you, no strings attached. We’ll talk through your questions and concerns and help you understand how the bankruptcy process works.
Bankruptcy has the power to change a person’s life. It can help you:
- Get rid of credit card debt and medical bills
- Stop foreclosure and repossession
- End creditor harassment and lawsuits against you
- Stop wage garnishment, and
- Give you a fresh start.
If you’re one of the many people struggling with bills you can’t pay, don’t wait to get the help you need. We look forward to helping you get a new start, free of the weight of debt.