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National bankruptcy filings now at 4-year record low

Michigan consumers may have heard the recent announcement that personal bankruptcy filings have dropped significantly. Statistics show that individual bankruptcy filings are down 13 percent in the first half of 2012, and 20 percent as compared to the 2010 numbers. Some states have seen even sharper declines in the same timeframe.

A number of factors may contribute to the reduction in personal bankruptcy filings. A major consideration may be the lending restrictions imposed by banks following the burst of the most recent housing bubble. Loans were simply harder to come by, resulting in fewer borrowers overall. The availability of consumer credit was also reduced, leading to a reduced rate of borrowing across the country.

Another factor may be a choice on the part of many consumers to simply spend less and save more. In a faltering economy, this time-honored approach has helped many individuals and families feel more secure as they face the uncertainties of the job market. Cutting down on overall debt can leave consumers with more discretionary income and greater financial stability.

While digging out of debt is possible for many Michigan consumers, there are some financial situations that cannot be alleviated by debt reduction alone. When an individual's debt load far outpaces his or her ability to pay, it may be time to research other options. In some cases, filing for personal bankruptcy is the most financially viable decision possible, and can provide a fresh start. A bankruptcy filing can eliminate many debts, and can also halt wage garnishments, repossessions and foreclosure actions.

Source: Boston Globe, "Bankruptcies wane as US relearns how to save," Todd Wallack, Aug. 18, 2012

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