Annie Baxter for American Public Media reports that in some areas of the country, bankruptcy filings are “plummeting,” but that doesn’t necessarily mean people are any better off. Baxter quotes law professor Melissa Jacoby: “We don’t always see a perfect alignment between good times and low bankruptcy filings.”
What kind of alignment do we see? Paradoxically, it’s that when times are good, such as they tended to be for more consumers in the 1990s, people start to take more risk, spend more, and get into debt. “Some of the highest peaks of bankruptcy filings occur in very prosperous times,” Jacoby is quoted as saying.
So, what that means for plummeting filings, is that there still may be considerable debt, and trouble making ends meet, but at the same time more people are being more cautious with their finances. Take the couple Baxter describes, as one example. The couple came into marriage with a mortgage and a considerable amount of student loan debt (which generally cannot be discharged in bankruptcy).
Either unemployed or underemployed during the course of their marriage so far, the couple has fallen on hard times, and it took a short sale to get them out from under the mortgage. Though Baxter doesn’t say it, the couple likely faced the possibility of home foreclosure.
But they still struggle. And though they’ve considered bankruptcy, they haven’t taken that step, and it’s likely that many other families face similar circumstances, but for whatever reason, are putting off filing for bankruptcy.
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Paradox: More Bankruptcy Filings In Boom Times