Life-changing events are one of the main reasons that people file for personal bankruptcy. When people are suffering from an unexpected event, like job loss, major illness or even divorce, bankruptcy may prevent them from paying off a debt they have accumulated.
Arizona readers of this blog may be aware that consumers often use their credit card to repay certain debts, leading to burdensome credit card debt that may then force them to file for Chapter 7 or Chapter 13 bankruptcy. However, recent reports indicate that people are saving more money across the country, whittling away at debt and subsequently reducing the number of bankruptcy filings--bankruptcy filings have decreased by around 20 percent over the last two years.
According to the Administrative Office of the United States' data, bankruptcy filings in the first six months of 2012 amounted to 627,000, compared to 781,000 in the same time period in 2010--equivalent to a 13 percent decline.
Personal bankruptcies have fallen to their lowest level in the last four years, as consumers have started saving more and borrowing less money, according to specialists. In 2007, when the financial crisis began, household debt payments were more than 14 percent of discretionary income, compared to less than 11 percent in the first four months of this year. This is the lowest the number has been since 2004, as people sold their houses, modified mortgages and repaid their credit card bills.
In addition to this, the U.S. Commerce Department reports that consumers saved 4 percent of their income in the second quarter of 2012, an increase compared to the 2 percent savings at around the time the recession began.
However, the unemployment rate remains high and not all Arizona residents may be earning enough to both cover their debts and increase their savings while retaining control over their possessions. They may wish to consider filing for bankruptcy to retain ownership of their home, car and other assets--even their financial life.
Source: Boston Globe, "Bankruptcies wane as US relearns how to save," Todd Wallack, Aug. 18, 2012