Personal bankruptcy filings are down, leaving many financial analysts questioning whether the drop in filings can be attributed to financial relief offered from governmental pandemic relief programs or to other economic factors. This stimulus relief offered consumers a much-needed financial boost, but the question remains how long this boost will hold off future bankruptcy filings.
The number of consumers reporting problems with paying their bills decreased between June 2019 and June 2020, according to figures from the Consumer Financial Protection Bureau (CFPB). The number of personal bankruptcies filed dropped 38 percent over a 12-month period between March 2020 and March 2021.
Government stimulus checks, decreased consumer spending, and the availability of mortgage forbearance programs could be part of the reason for this decrease in filings. During this period, consumers have also reported cutting back on discretionary spending on expenses, such as vacations.
Normally, a decrease in bankruptcy filings indicates an overall improvement to consumers’ financially lives, but experts warn against being too optimistic about these figures. Considering the COVID-19 pandemic is entering its second and the number of consumers who have died or become seriously ill during this time, it is unlikely that all consumers are thriving financially.
The federal bankruptcy court system attributes the decrease in bankruptcy filings to many different factors, including a reduced amount of consumer spending, moratoriums on evictions and foreclosures, as well as the temporary closure of courtrooms for in-person hearings.
In this study, the CFPB surveyed the financial lives of approximately 1,700 consumers, giving these individuals a series of subjective questions to answer regarding their finances. The number of survey participants reporting that they had money remaining in their accounts at the end of a month increased by 3.9 points to 46.6 percent. The number of consumers reporting that their finances were controlling their daily lives dropped 8 points to 32.7 percent.
In the four years immediately preceding the COVID-19 pandemic hitting the U.S., consumer bankruptcies never fell below 750,000 annually. However, between April 2020 and April 2021, the number of consumer bankruptcies filed dropped to 473,000. At the same time, the number of business bankruptcies fell by 13.9 percent.
As the government stimulus programs wind down and the moratoriums on foreclosures and evictions come to an end, this trend could quickly change, which is why many financial experts remain only cautiously optimistic about these figures.
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If you have questions on this topic or are in financial crisis and considering filing for bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at www.miamibankruptcy.com.