Everyone knows that the past two years loaded on many challenges of a financial nature to individuals, families and businesses. Despite this, due to a multitude of reasons, bankruptcy filings did not accelerate in 2020.
Now, though, ominous trends reveal a troubling period ahead for many.
Filings remain low so far in 2021
Market Watch reported that entities filed 181,000 bankruptcies in May of 2021, a reduced rate of 29% from 2020. This comes after a 30% reduction from 2019 to 2020.
Some studies suggest that low filing rates will continue for a while, though this does not mean everyone can pay all of his or her bills on time. In fact, many people wait too long to file for a Chapter 7, a liquidation, or Chapter 13 bankruptcy, an installment plan, which can result in court-approved agreements to deal with debt.
Delayed filings come with consequences
Evidence indicates individuals who accumulate debt often delay filing for bankruptcy for a year or longer. This frequently results in expanding debt that can prove difficult or impossible to pay off.
A typical borrower could increase the personal debt by about $4,000 each month. Delayed filings also come with other consequences:
- A decrease in the credit rating
- A larger pile of debt
- An increase in shadow debt
- An increase in stress and worry
While a bankruptcy filing remains a difficult personal choice, an early filing could provide benefits for many people struggling with debt. A timely filing could increase cash flow and begin the journey back to solvency. Some observers believe bankruptcy filings could increase as several government programs end in 2021.