Why America should see an increase in the number of bankruptcy filings
During this 12-month period the economy saw a surge in home equity, pandemic relief funds being pumped into small businesses, coronavirus tax relief and economic impact payments being paid to individuals in the form of stimulus checks, advances on the child tax credit, an eviction moratorium, student loan deferment, record low unemployment rate, “The Great Resignation” as individuals strayed away from their nine to five office jobs to pursue their passion remotely or simply to find remote work.
As of the date of this article we are seeing many homeowners with large sums of equity in their home. Although the housing market is “cooling off” according to housing experts the surge in the housing market will leave many home owners with high amounts of equity in their homes.
Many experts believe that with high home equity we will avoid record number foreclosures like we saw in 2007. We are living during a time where household debt is at a record high the cost of living is almost higher than it’s ever been with inflation near a 40-year high .
The eviction moratorium sunset provisions that went into effect last August, 2021 for New Jersey are finally resulting in individuals being evicted.
- What causes bankruptcy?
Generally speaking, a financial crisis, like sudden unemployment, unexpected medical bills, or just the overall need for the honest debtor to keep up with day-to-day cost. The amalgamation of small, but mighty economic events into everyday life exacerbated by a single moment. The question we answer on a case-by-case basis is “when is that moment for you?
When you are at the point where your voicemail box is always full, you avoid answering unknown numbers because you have convinced yourself that it “must” be a debt collector, and your bank account is consistently getting overdraft fees month after month, maybe the decision is easy to make. How about if you live in a beautiful home, yet constantly find yourself living check-to-check? You can make ends meet here and there, but it just feels like you never are quite able to save money because you always spend a large proportion of your income on your home or some other debt. The decision is harder.
For some people it’s mental, they would rather “die on their sword” than face the stigma which endures as a byproduct of bankruptcy.
- Where did bankruptcy come from?
Bankruptcy has always been stigmatized in the public eye since its roots traced back to the first bankruptcy law in 1542 England where debtors were treated as quasi-criminals. Debtors had to tread carefully or risk the death penalty for engaging in fraud. See Tabb, 3 Am. Bankr. Inst. L. Rev. at 10. During The Renaissance, defaulting bankers would have their business benches broken as a symbol of failure and were known thereafter as “the one with the ‘broken bench’ or ‘banco-rotto.’” See Harold Remington, A Treatise on the Bankruptcy Law of the United States § 1 at 168 (5th ed. 1950)).
- How could bankruptcy impact the average person?
Indeed, your credit report will reflect a bankruptcy for seven to ten years. Depending on your profession, a bankruptcy may preclude employment based on stigma alone. Imagine, for example, being a police officer about to arrest a criminal, then you are suddenly offered a bribe. Does the public trust bankrupt police officer’s enough to not think twice about this situation? We need confidence, right? Now suppose that same police officer’s spouse has been recently diagnosed with multiple sclerosis, overtime has been cut because of pressure on municipalities to decrease taxes in light a recession (or for another reason), and refinancing the home is untenable because of the officer’s debt-to-income ratio. The cost of living continues to rise as salaries barely keep pace.
The old adage of the person you see today being the person you need tomorrow comes to mind. Point being bankruptcy is for the “honest debtor” who could be anyone.
As a country, many fear that our “moment” is almost here. Expert opinions have changed from “maybe there could be a recession in the near future” to “a recession is inevitable.”
Will the average American stop spending and save now for the cold winter? In my opinion, no, because ownership is “so last year.” We do not buy, we rent or lease. Rather than cook, we order Uber Eats. On a sunny day, we do not just go for a walk, we go to the spa (where we are not members) and take pictures in the infinity pool. Forget paying off credit cards, lets buy an inflated flight to Miami, rent an Air BnB, while ordering amazon gifts for our best friend’s birthday.
I am not an expert on the economy, I practice bankruptcy law. If you have any questions regarding bankruptcy law feel free to reach out to my firm for a free initial consultation. We are a debt relief agency, we help people file for bankruptcy relief under the Bankruptcy Code.
Let me know your thoughts, hopefully this article does not age well.