Bankruptcy filings continue decline
As the economy continues to recover, however slowly, instances of personal bankruptcy are down.
This post comes from partner site Credit.com.
Economic conditions are improving significantly nationwide -- and because of this, fewer consumers are in such dire financial straits that they need to seek protection from their creditors.
The first three months of 2012 lent a lot of credence to earlier predictions that bankruptcy filings would fall considerably throughout this year, according to new data from Fitch Ratings. In the first quarter of the year, bankruptcies are about 8% or 10% lower than they were during the same period in 2011, though that rate is expected to level off soon. Banks are once again broadening credit standards and therefore allowing those with iffier borrowing histories to access loans, which in turn increases credit risk.
By year’s end, it’s likely that bankruptcies will have fallen between 4% and 5% on a year-over-year basis, the report said. However, the rate of improvement in bankruptcy filings made nationwide between 2010 and 2011 will be nearly impossible to match.
Lenders may already be seeing these effects take hold. The number of filings nationwide rose 19% between January and February alone, according to the most recent data from the American Bankruptcy Institute. In addition, the number of filings per day -- February had only 29 days compared with January’s 31 -- rose 27%. However, those figures were still 5% below the rate observed last February.
Some of these filings may have been the result of lingering economic effects, the report said. (Post continues below.)
"The stagnant housing sector and high unemployment continue to stress the cash flow of consumers and businesses," said Samuel Gerdano, the executive director for ABI. "As consumers and businesses work to shed tremendous debt loads, there are times when bankruptcy is the only shelter to provide financial relief."
Many consumers sought bankruptcy protection during the recent recession, and many experts have said that at some point these would have to reach a nadir; there are only so many people whose financial situations are difficult enough that they need to file for bankruptcy protection. Consequently, as with credit card charge-offs or foreclosure proceedings, there had to be a logical point at which financial troubles would begin to move in the opposite direction after a considerable amount of hardship suffered by consumers nationwide.
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