Consumer Bankruptcy filings declined through November, 2011 - down 5% from October. This slide continues the year long trend in that filings are down 12% overall since last November. While some may think that the long awaited recovery is gaining momentum, others, myself included, look at it somewhat differently.
It is my personal opinion that the number of filings are down for a myriad of reasons:
First, I believe that those folks who were pressured into filing Personal Bankruptcy, particularly, either Chapter 7 or Chapter 13, have already done so. By pressured I mean by their creditors. When creditors are actively pursuing collection on debts is when most folks are probably more likely to file. For example, when a creditor initiates court action, like a warrant-in-debt (Virginia), Garnishments, and/or Foreclosures, etc., folks turn to Bankruptcy to stop the pursuit. Once someone files a good faith bankruptcy an Automatic Stay comes into play effectively stopping a creditor's pursuit.
Second, with unemployment elevated anywhere between 8-15%, depending on your source, there are a considerable number of families out of work. Loss of work invariably causes a reduction in assets. By this I mean that when the income stream is disrupted we are more likely to have less assets or "things" for a creditor to try and take. For example, when there is no paycheck a creditor may decide not to pursue the individual debts because they do not see any return. It is a simple business decision to avoid the fees of trying to collect on a debt if the debt is noncollectable.
When someone does not have the personal assets to cover outstanding debts, then that person is ofter referred to as being judgement proof. A creditor gains no benefit from obtaining a judgment if they are not able to collect on that judgment - i.e., judgment proof; and ...
Third, those folks who may be likely candidates for personal bankruptcy have simply decided that at the present time they will simply turn off the phones. We've all been there with that late bill for a creditor who calls every minute of every day! I would bet Mitt Romney's $10,000 that there are folks that have discontinued home phone service to avoid creditors - we all now have cell phones anyway, right!
So, unfortunately, I do not think that simply because the number of filings are down month to month is a positive sign that good times are coming. The advice that I would offer is (1) get your financial house in order, now not later; (2) if you are questioning whether bankruptcy is right for you, strategically, then give us a call because dealing with the problem today means YOUR recovery happens sooner than later; and (3) remember that buying on credit is only spending tomorrows paycheck today!
Be Blessed and have a Tim Tebow kinda day!
(stand up for what you believe in!)
Kirk
