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Fewer bankruptcy filings may not mean rosy finances

Bankruptcy cases in Virginia and across the country are on the decline, but the reasons why may be more complex than they first appear. According to a report by Supreme Court Chief Justice John Roberts, bankruptcy filings have reached their lowest point in 10 years. While nearly 1.6 million filings were made in 2010, amid the widespread financial crisis, that number was halved by 2018. During the year, approximately 770,000 cases were filed in bankruptcy court, reflecting both corporate and consumer plans. The vast majority were filed by consumers, comprising 97 percent of the total.

However, the reasons why people are not filing for bankruptcy may not be as rosy as they first appear. Some experts noted that people are not filing because they feel they cannot afford to do so and are not concerned with protecting their few assets. In addition, 2005 legislation made it more difficult for consumers to file for bankruptcy and compelled lawyers to raise their rates given the additional burden imposed by the law. While bankruptcy cases are relatively affordable in comparison to other types of legal work, people truly struggling to make ends meet may find them an additional insurmountable expense.

Some bankruptcy attorneys say they often see potential clients who feel the need to file for bankruptcy and pledge to return when they have funds available but never gather the cash to do so. The report also highlighted other concerning statistics, including a significant spike in filings by older Americans. Many people in this demographic are facing declining income and increased health care costs. When people are struggling to pay their bills and handle credit card debt or medical costs, they may be looking for a solution to provide debt relief. A lawyer can provide guidance in moving forward to filing for Chapter 7 or Chapter 13 bankruptcy.

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