Rising Bankruptcy Filings in 2023: Understanding the Surge
Rising bankruptcy filings have become a pressing concern recently as financial instability impacts individuals and businesses alike. In this post, we’ll investigate the reasons behind the surge in bankruptcy filings and analyze its economic repercussions.
Firstly, we’ll explore SVB Financial Group’s Chapter 11 filing and discuss how the stock market slump due to the banking crisis has played a significant role in tightening credit access. This restricted access has further exacerbated bankruptcy filings across various sectors.
Furthermore, we will compare current total bankruptcy filings with those during the peak of the Great Recession, shedding light on their similarities and differences. As judgment day approaches for consumers facing potential lawsuits and property loss, it is crucial to understand what lies ahead.
In our final section, we will differentiate between Chapter 7 and Chapter 13 bankruptcies while examining factors contributing to increased consumer filings. One can better navigate these financially turbulent times by gaining insight into these rising bankruptcy filings trends.
SVB Financial Group Files for Chapter 11
SVB Financial Group’s recent Chapter 11 bankruptcy filing adds to the ongoing banking crisis, causing stock market drops and raising concerns about banks’ financial health.
- Stock market slump: The banking sector’s instability has led to significant drops in stock prices, impacting investors and contributing to economic unease.
- Tightening credit access: Banks may become more hesitant to extend credit, leading to higher interest rates and stricter lending standards, making it difficult for businesses and individuals to secure loans or refinance existing debt.
Bankruptcy Filings on the Rise Again
Bankruptcy filings are back on the rise after a pandemic-induced lull, according to data from Epiq Bankruptcy and the American Bankruptcy Institute.
While still below Great Recession levels, tighter credit access and rising interest rates could lead to even more bankruptcies among businesses and consumers.
Comparison with Great Recession peak numbers
The figures for bankruptcies are yet to reach the peaks of the Great Recession, but specialists caution that this could change if economic circumstances become more dire.
Impact of tighter credit access on Bankruptcies
- Tighter credit access can make it difficult for individuals and businesses to obtain loans or refinance existing debts, potentially leading to more bankruptcies.
- Rising interest rates may exacerbate financial stress by increasing monthly payments on variable-rate debt like adjustable-rate mortgages or home equity lines of credit.
- This combination could force more people into filing for bankruptcy protection as they struggle to manage their finances amidst mounting pressures.
Judgment Day Approaching for Consumers
According to Cardozo School of Law professor Pamela Foohey, consumers may face “judgment day” soon, but arriving could take a while.
Last year, there was a 30% increase in people filing for Chapter 13 repayment plans, which allows individuals with regular income to develop a plan to repay all or part of their debts over three to five years.
Difference between Chapter 7 and Chapter 13 bankruptcies
- Chapter 7: Involves liquidating non-exempt assets to pay off debts and typically results in a discharge of most unsecured debt.
- Chapter 13: Allows individuals with regular income to develop a plan to repay all or part of their debts over three to five years.
Factors contributing to increased consumer filings
Rising interest rates, tightening credit access, and the lingering effects of the pandemic have contributed significantly to this uptick in bankruptcy filings.
As these factors continue to impact households nationwide, more consumers may seek relief through bankruptcy proceedings.
Conclusion
Bankruptcy filings are rising, causing concern for many Americans who feel the impact of tighter credit access.
It’s important to understand the difference between Chapter 7 and Chapter 13 bankruptcies and the factors contributing to increased filings.
With the recent bankruptcy filings of SVB Financial Group, it’s clear that individuals and businesses are feeling the effects of economic uncertainty.
Staying informed about economic trends and potential legal action is crucial today.
We can better understand their potential implications for our financial future by keeping an eye on rising bankruptcy numbers.
Make sure to check out USCourts.gov for more information on Chapter 7 bankruptcy and Chapter 13 bankruptcy.