The number of bankruptcy filings is still trending downward, but the decrease seems to have leveled off.
The numbers are down overall, and have been down since 2012, but March 2014 filings were 18 percent higher than February 2014 filings. Observers cited declining interest rates, household deleveraging and high filing and legal fees as reasons for the continued decline. They predict that filings may start to go up again as soon as next year.
Business bankruptcies are declining as well, largely due to more available corporate credit.
The end of a trend?
Most economic sectors in a capitalist economy are cyclical: prices rise and fall according to random factors that are difficult, or even impossible, to see and explain. Bankruptcy is no exception. Filings are down now, but signs are beginning to point to an increase:
- Interest rates: Mortgage interest rates have begun to inch back up from the historic lows seen a few years ago. As money becomes more expensive, it becomes harder for American families to borrow money to help in a financial emergency.
- Credit: At the same time, banks are beginning to relax some of their strict borrowing requirements for items such as houses and cars. Consumers may once again be tempted to buy the best house or car possible, as opposed to the one that is the most affordable.
- Foreclosures: Banks are now starting to work through the foreclosure inventory that built up during the robo-signing controversy and the extreme backlog of cases.
- More small business bankruptcies: Small and medium-sized businesses drive the economy, and it looks like that engine is losing steam.
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