Bankruptcy Filings Increased in Q3 2023

The expected wave of pandemic-related bankruptcies may wash ashore after all. Consumer bankruptcy filings rose 13 percent in the third quarter of 2023.

Business filings rose 29.9 percent, from 13,125 to 17,051, in the year ending Sept. 30, 2023. Non-business bankruptcy filings rose 12.4 percent to 416,607, compared with 370,685 in September 2022.

This is the third straight quarter that total bankruptcy filings have risen, following a decade-plus decline. Bankruptcies fell especially sharply after the pandemic began in early 2020, despite some COVID-related disruptions to the economy.

Why People File Bankruptcy

Large government relief packages kept families going through the pandemic and helped them adjust to post-lockdown life. Since most families spent all their relief money on these two things, they have little or nothing when a financial storm suddenly hits. These financial storms include:

• Job Loss/Economic Downturn: Most people have little or no savings and basically live paycheck to paycheck. Any income disruption, no matter how short or slight, usually has devastating consequences.
• Divorce/Separation: Most people go to bankruptcy court and divorce court at about the same time. When considering direct costs, like attorneys’ fees, and indirect costs, like higher household expenses, the average divorce costs well over $10,000. It’s usually a good idea to reach out to a Chicago bankruptcy lawyer and file Chapter 7 before filing divorce. More on that below.
• Long-Term Illness: Medical bill inflation usually outpaces overall inflation, which is saying quite a lot. Medicare and most other health insurance plans only cover about 80 percent of such costs. 20 percent of long-term cancer treatments is a lot of money that most families don’t have.

So, the primary cause of a bankruptcy filing is mostly, or entirely, beyond the debtor’s control. Overspending or poor financial planning is usually a contributing cause. Bankruptcy, especially Chapter 13 bankruptcy, imposes financial discipline on these families. That’s one of the benefits of bankruptcy. More on that below as well.

Bankruptcy filing may be beyond your control, but bankruptcy recovery is different. Responsible credit use, along with simply paying bills on time, causes most post-bankruptcy credit scores to improve significantly in a matter of months.

What It Does for You

The Automatic Stay, asset protection, and debt discharge may be the three biggest benefits of bankruptcy. These benefits are unavailable anywhere else.

When debtors file voluntary petitions, Section 362 of the Bankruptcy Code blocks most creditor adverse actions, such as:

• Creditor harassment,
• Foreclosure,
• Wage garnishment, and
• Repossession.

Many of these actions, such as repossession, are easy to stop but almost impossible to undo. So, if your property is at risk, speak to a bankruptcy lawyer ASAP.

Asset protection extends beyond the Automatic Stay, which applies to creditors. The trustee, who basically represents the creditors, may seize and liquidate property to pay debts, unless that property is exempt. Some property exemptions include:

• Home equity,
• Motor vehicle equity,
• Retirement account,
• Personal property, and
• Government benefits.

The equity protection usually protects the asset. Assume Rachel’s used car, which is paid off, is worth $500. The equity exemption, even though it’s only $400, protects her vehicle. The trustee cannot seize it, pay Rachel her equity, pay storage fees, and pay sales costs without going into the red.

Discharge basically means the judge eliminates the legal obligation to repay a debt. Credit cards, medical bills, and most other unsecured debts are dischargeable.

 Reach Out to a Diligent Cook County Lawyer

No matter what kind of financial problem you are having, bankruptcy could be a way out. For a free consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. Convenient payment plans are available.

Source:

uscourts.gov/news/2023/10/26/bankruptcy-filings-rise-13-percent