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Bankruptcy means a second chance

On Behalf of | Aug 15, 2023 | Bankruptcy |

According to many indicators, the economy is doing well in Indiana and nationwide. Unemployment is at historic lows. Inflation has slowed. Some economists who had predicted a recession have revised their forecasts and found no such danger on the near horizon. Consumers are starting to feel more confident, too.

Still, there are other signs of trouble. One statistic to note is the number of bankruptcy filings.

Courts note 10% rise in 2023

According to federal government statistics, the number of bankruptcies rose 10% in 2023 over the previous year. The U.S. courts compiled bankruptcy filings over the 12 months ending June 30 and compared them to the previous year’s numbers, finding 418,724 filings in 2023, compared with 367,886 in 2022.

Of the 2023 statistics, 15,724 were filed by businesses and 403,000 by non-businesses, including individuals. By far the most common types of bankruptcy filings were Chapter 7 (29,125 filings) and Chapter 13 (173,362 filings).

A fresh start

There are many possible explanations for the rise in personal bankruptcies, but the main takeaway is simply that, even as some aspects of the economy improve, a lot of people are still struggling. From a macroeconomic perspective, that may be a worrying sign, but there’s another way to look at it.

Every one of those personal bankruptcies involves a person who is in dire straits. Perhaps they became overwhelmed by medical costs after an injury or illness. Perhaps they lost a job and could no longer keep up with their monthly bills. Filing for bankruptcy is their first step toward getting their finances back in order.

As soon as they file for bankruptcy, the court will order their creditors to stop bothering them while they work out a plan to repay what they can. At the end of the process, the court will dismiss most of the person’s remaining debt, allowing them to begin rebuilding.

That’s something to remember when you read about bankruptcy statistics: Each one of those numbers represents a person who got a second chance.