Bankruptcy Filings Are Down Across The Nation

An estimate by the Federal Reserve Bank of  New York, reports a large percentage of the population is deemed as “financially solvent”. Financial insolvency, otherwise known as “being broke”, means one owes more in debt than has in valued assets. The FRBNY estimates nearly 15% of the population is considered financially insolvent.

As the economy continues its turbulent path and employment complications from the pandemic rage on, financial instability grows among more families than ever before.  It is reported that bankruptcy filings across a 12-month period between June 30, 2019 and June 30, 2020 were down around 12%.  These findings lead us to ask, why only a marginal percentage of the population is currently seeking financial freedom through bankruptcy.

Myths, Busted

For most people, the differences between bankruptcy facts and bankruptcy myths are not well known. Unfortunately, this leads to the spread of misinformation and misconceptions about the risks and benefits of filing for bankruptcy. A lack of understanding is, often, what stands in the way of someone finding debt relief through bankruptcy.

For example, most people carry the opinion that the need for filing for bankruptcy results from being lazy, or financially irresponsible. If only they made better choices, lived within their means, or worked harder they wouldn’t be experiencing problems with debt.  This is False. Financial problems can strike anyone, at any time. The unbalance between debt and assets can arise often through no fault under situations such as losing a spouse to death or divorce, losing a job due to the pandemic, or experiencing considerable medical illness.

Another common source of bankruptcy misinformation surrounds credit scores and future credit applications. Many people fear bankruptcy, worrying that their credit will be irreparably damaged, or unable to obtain future credit. This is False. The truth is high debt balances, unpaid or inconsistently paid debts, and high debt to income ratios does more damage to a credit score than a bankruptcy filing. This is because when you file for bankruptcy, you are provided a path to eliminate or repay a portion of your debts. This brings your balances down significantly, if not completely; paving a way for a fresh slate of credit to begin to rebuild.

If you are suffering in debt or financial instability, consult with a Houston bankruptcy attorney today to discuss your options for debt relief.