Bankruptcy filings continue to decline despite soaring credit balances

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US courts say that fewer Americans are going to bankruptcy court to solve their money problems. When should you file for bankruptcy under Chapter 7 or Chapter 13? When the coronavirus pandemic began in March 2020, fewer people filed for bankruptcy and revolving loan balances went down by a lot. Even though revolving credit commitments went up a lot in 2021, the number of bankruptcy filings went down a lot.

The number of people who filed for personal bankruptcy dropped in the fiscal year that ended on September 30. This is according to the United States Courts Administrative Office. In 2020, 590,170 people filed for bankruptcy under Chapter 7 or Chapter 13. In 2021, that number dropped to 418,400.

How to get credit back after filing for bankruptcy

Since the start of the outbreak, the number of bankruptcy filings has gone down for a number of reasons. On the one hand, customers have less credit card debt that they can’t pay off right away. According to a study by the US courts, increased government benefits like stimulus no checks, a moratorium on foreclosures, and limits on evictions may have also “eased financial strains in many families.”

Federal Reserve data shows, however, that revolving credit balances grew 7.7% in 2021 alone. This could mean that some people are thinking about filing for bankruptcy to pay off unsecured debts like credit cards and personal loans.

Read on to find out more about your other options for paying off debt, like debt consolidation loans, and how to decide if you should file for bankruptcy. If you want to get a personal loan to pay off debt, you can go to Credible to compare interest rates from different lenders like OakParkFinancial.

According to data, medical bills are the most common reason why people file for bankruptcy.

Increasing credit amounts have not yet caused more people to want to file for bankruptcy.

At the start of the pandemic, the Fed says, Americans worked hard to pay off their credit card debt and didn’t take out any new loans. This led to a big drop in the amount of outstanding revolving loans. People are starting to borrow again, though, because the economy is getting better and the unemployment rate is going back to where it was before the recession.

Revolving credit balances went from $961.5 billion in January to $1.04 trillion in November 2021, which is a big jump every month. Because of this, customers’ credit card, auto loan, and personal loan balances go up.

Your credit score can go up if you get a tax refund.

People who are having trouble paying their bills can get the money relief they need by filing for bankruptcy. Debtors should know about the different ways they can pay back their debt, like credit counseling, debt management plans, and debt consolidation loans.

If you’re thinking about getting a personal loan to combine your debts, you can get a free estimate of your terms at Credible. This won’t hurt your credit score. This can help you figure out if this is the best choice for you.

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How to Decide if You Should File for Bankruptcy

People can get back control of their money through a legal process called bankruptcy. The two types of bankruptcy are Chapter 7, which is sometimes called a “liquidation bankruptcy,” and Chapter 13, which is sometimes called a “reorganization bankruptcy.”

If you file for bankruptcy, you can change the way you pay back your debt and lower the amount you owe. But there are serious consequences, like a mark on your credit report that will never go away. Also, because bankruptcy is a public court case, people often need a bankruptcy lawyer. Because of these effects, most people think of bankruptcy as a last resort.

The National Credit Counseling Foundation says that there are times when bankruptcy is right, even though it has some negative effects (NFCC). Some of the reasons why people file for bankruptcy are:

  • Your commitments are more important than your assets and net worth.
  • Your income isn’t enough to cover all of your expenses.
  • Creditors who sue you for unpaid debt can take money from your paycheck.
  • You want to get a loan so that you can pay your bills and other bills.
  • Your house is in danger of being taken away from you.

Even though each of the above situations could be enough to make you file for bankruptcy, you should also think about your other options for dealing with your debt. Your finances might get better even if you don’t file for bankruptcy. Visit Credible to talk with a knowledgeable lending expert about your options for consolidating your debt.

The Biden administration changes its policy on federal student loans if the government goes bankrupt.

Options besides filing for bankruptcy

Declaring bankruptcy is not the only way out for customers who are having trouble paying their bills, but it can give them a fresh start. Think about the other ways you can pay off your debt:

Talk with your creditors and come to an agreement. Talk to your loan manager if you are having trouble making your mortgage payments. You may be able to get a loan modification or a mortgage forbearance. If you owe money to the IRS, sign up for a payment plan or use an offer in compromise to pay less (OIC).
Join a program to help you with your credit. A non-profit credit counselor can help you learn how to deal with your debt by teaching you about money. A credit counseling service can also help you set up a debt management plan (DMP) and negotiate with your creditors on your behalf.
It’s a good idea to combine your credit card debt. With a balance transfer or debt consolidation loan, you might be able to lower the interest rate on your credit card debt. For the best balance transfer credit card offers and personal loans for debt consolidation, you need to have good credit.

Credible lets you look at offers for free balance transfer cards and debt consolidation loans, as well as take a quick credit survey, so you can decide if this debt management plan is right for you.

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