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Are Fewer People Benefitting from Bankruptcy?

Consumer debt, which drove almost 1.37 million consumers into bankruptcy during 2011, is on the rise. Yet, consumer bankruptcies slowed down last year from the 1.55 million bankruptcy filings in 2010, a decline of 12 percent. Some experts attribute it to more cautious consumer spending and a decline in credit card debt. Others say that we’re just running out of people who can benefit from filing. Despite the drop in bankruptcy filings, however, sources indicate that national levels of poverty and consumer debt are on the rise. And, they show no signs of changing any time soon.

Bankruptcy is meant to help consumers get back on their feet after experiencing irreplaceable economic loss. Bankruptcy allows individuals to restructure their debt by agreeing to a structured plan requiring the debt to be paid between two and five years. Since the onset of the financial crisis, the total revolving debt, also called credit card debt, went into a steep decline; dropping from $989.1 billion in 2008 to $826.7 billion in 2010, according to a Feb. 7 Federal Reserve statistical release. By the end of 2011, the revolving credit moved upward, reaching $827.5 billion. During the first three quarters in 2011, the quarterly revolving debt was below $800 billion; with a low of $779.6 billion at the end of the first quarter. In December, the revolving debt rose to above $800 billion, resulting in a 2011 year-end cumulative total of $827.5 billion.

Poverty is on the Rise despite less Bankruptcy Filings

While bankruptcy filings have seen a slight dip during the fall of 2011, compared with the same time period last year, reports indicate that overall poverty is on the rise. The 2010 U.S. poverty rate, the latest such rate available on the U.S. Census Bureau website, was 15.1 percent, with 9.2 million families living at or below the poverty level. The poverty threshold, also called the poverty line, is the minimum income an individual needs to survive. The poverty threshold depends on the number of people in a family and the location of one’s residency. As of February, debt collectors are pursuing approximately 30 million Americans. And, credit agencies, including Equifax Inc., Experian PLC, and TransUnion LLC, have collected credit information on more than 200 million Americans.

If you have questions about foreclosure, loan modification, bankruptcy, or other alternatives, please feel free to call my office at 954-484-9987, send an e-mail to emil@fleysherlaw.com, or complete the contact form below.

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