Bankruptcy and the Next 4 Years

Votes have been cast.  Election is done.  Now what?  Much was made by many commentators that after all the money, the ads, and the speeches the country is essentially where it left before the election.  So the question that everyone (and I mean everyone) is asking, What will this mean for bankruptcy?

Well, recently there was a good article over at the Credit Slips blog  by Jean Braucher where she gives her best educated guess as to where bankruptcy filings are headed.  Her prediction?  Bankruptcy filings will increase – but not for a couple of years.  Her reasoning is interesting.

Basically it all boils down to debt.  Debt drives bankruptcy, not the economy.  While the two are related, if people don’t have the ability to take on new debt, then there is no reason to file for bankruptcy.  After all, the reason you file bankruptcy is deal with your debt problems.  Over the last few years it has been difficult to get a credit card, house loan, car loan, etc.  If lending is tighter, people will have less debt and thus will not need to file bankruptcy.

However, if the economy improves – which Ms. Braucher predicts it will – then people will be able to get those loans or approved for that new credit card.  People will start incurring new debts.  And where there is debt, bankruptcy may not be far behind.

It seems that this logic is playing out correctly.  Currently bankruptcy filings are not only down in Arizona but nationwide.  People simply haven’t had the ability to get into new debt.  We will see if economy improves.  If it does, bankruptcy filings may be on the rise.

What do you think the next 4 years will hold?