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2014 and Trends in Debt Relief and Personal Bankruptcy to Watch out For

Posted By:  |  January 16, 2014  |  0 Comment(s)

2014 bankruptcy and debt trends

Over the course of 2013, Equifax repeatedly reported good news for the US economy in relation to the National Consumer Debt. With decreases and increases in all the right places, the projection for the US economy in 2014 is looking positive. Consumer trends noted in 2013 surrounded an all-time low on mortgage delinquency rates, an overall higher responsibility in American consumers, and a higher consumer confidence in response to the economic recovery. According to a study cited by the American Bankruptcy Institute, bankruptcy rates in 2013 were also promising for the overall health of the economy, which reportedly fell 13% from 2012 to the first half of 2013.

History and Factors in Bankruptcy Fluctuation

Consumer bankruptcy filings have a tendency to fluctuate, and have fluctuated significantly over the last decade in the US. Factors that have encouraged changes in bankruptcy filings include changes in law, as well as the housing and financial downturns in the economy. The all-time high over the last decade was reported in 2005, with 2 million consumer bankruptcies. When the Bankruptcy Abuse Prevention and Consumer Protection Act was enacted, consumer bankruptcies filings followed suit and dropped to 600,000 in 2006. With the ensuing housing market downturn over the following years, bankruptcy filings increased to 1.5 million by 2010.

Future Projections for Bankruptcy in 2014

With continued hope for and confidence in the US economy, which are reflected by low interest rates, declining unemployment, and declining loan delinquency rates, many have concluded that the average American consumer is paying closer attention to their balance sheets. This is promising in the world of debt relief.

With bankruptcy rates declining gradually since 2010, people are starting to wonder when it will rise again. In a consumer poll conducted online with voting Americans by ABI, 17 percent believe the turnaround will occur in the first quarter of 2014, while 22 percent opt for later in 2014. The majority, 60 percent, say they are unsure when the bankruptcy rate will increase.

Signs and Factors that Predict Rising Bankruptcy

Although it is difficult to predict the future in relation to when the bankruptcy rate will begin to rise again, there are some key factors in the economy that have historically increased bankruptcy rates in the past. Unemployment rates, although now steadily decreasing, will likely have a negative effect on consumer bankruptcy should they increase. Divorce, as well as unexpected medical emergencies and the resulting costs, are personal factors that, when coupled with high debt, have led consumers to take debt relief measures – including bankruptcy. Since mortgage loans account for the largest portion of the US national debt, an increase in mortgage interest rates could easily account for a rise in bankruptcy rates.

Watching for these economic indications may help consumers prepare for the coming year. But, since current bankruptcy numbers reveal the increased level of awareness and responsibility in consumers, it seems consumers are well on their way to avoiding the debt that leads to bankruptcy filings. Although the economy is still on shaky ground, 2014 is looking hopeful.

Poll

  • How important is it to you for a debt consolidation company to offer financial education resources?
  • Takes your existing debt and try to settle with your creditors for a lower amount. If you pay off the settled amount, your debt will be considered paid in full.
  • Negotiates with your creditors on your behalf.
  • Fee based on a percentage of your total starting debt or a percentage of the debt they save you.
  • Most settlement companies have you create a separate "escrow" account where you will make monthly contributions over a certain amount of time to contribute to your settlement. Once there is a substantial amount of funds to show your creditors, the settlement company will try to negotiate a lower amount of debt.
  • Combines all your debts and creditors into one monthly payment.
  • Allows you to pay one monthly payment to the consolidation company, instead of multiple payments to different creditors.
  • You no longer owe your original creditors; instead you pay one monthly payment to your consolidation company.
  • Consolidation companies can help negotiate lower interest rates on your debts and help lower your total debt payment in the long run. A lower interest rate will lower the amount you owe in the end.
  • Allows you to consolidate all your different debts into one personal loan that can be paid off over time.
  • Can offer borrowers a lower interest rate with a longer payback term (compared to high-interest credit cards or medical bills). This will lower the amount of money required to pay off the loan over time.
  • Personal loan debt consolidation can be an effective way to raise your credit score quickly (within 3-6 months).
  • Borrowers can receive funds from their loan within only a few days.

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