• 08
  • July
    2011

There are many factors that affect the decision to file for bankruptcy. Some of the reasons, such as medical bills and job loss, are fairly straightforward.

A reason that is not as well known, however, is the availability of various forms of consumer credit. In a tight, post-Recession economy in which credit is harder to come by than before, the difficulty of getting credit can push people in bankruptcy.

A law professor who teaches bankruptcy law, Robert M. Lawless of the University of Illinois, puts it this way: "There is a lot of mythology about what drives bankruptcy rates," he said. "But consumer credit appears to be the most significant factor."

Mr. Lawless points out that, in last year or two, access to credit has become somewhat less difficult than it was immediately after the Recession ended. That helps to explain why the overall number of bankruptcy filings is down somewhat nationally. The number is expected to be down as much as 10 percent this year, from 1.56 million filings in 2010 to about 1.45 million this year.

That's still a lot of bankruptcies. The majority of these filings are for Chapter 7 bankruptcy; they account for nearly 70 percent of the total.

Chapter 13 bankruptcy is also a valid option, especially for those seeking to protect their homes from foreclosure. Debtors to come up with a payment plan under which they agree to pay off a portion of their debts over a three-to-five year period.

If you have questions about bankruptcy, contact us to discuss your specific case.

Source: "Fewer Americans File for Bankruptcy, "New York Times, 7-6-11