Bankruptcies in the U.S. had slowed down in 2021, but they are set to grow in 2022. It’s believed that higher interest rates, as well as sustained inflation, could play a role in Chapter 11 filings making an appearance during the middle of 2022.
In 2021, the United States saw a year of fewer bankruptcies. There were a few reasons for that ranging from the federal stimulus money that was given to many Americans as well as lender forbearances that set aside the need for payments until people could become financially stable again. Unfortunately, those protections are running out, so there is a chance that businesses and individuals will start turning to bankruptcy again as their finances get tighter.
Consumer filings were down in 2021
According to the American Bar Association, bankruptcy filings dropped to 544,463 in 2020. That was around 230,000 cases fewer than in the two years prior.
Changes in stimulus benefits and the CARES Act SABRA provisions may make a difference in how many bankruptcies are seen in 2022. As of October 2021, the CARES Act will run until March 2022, and this may help prevent some bankruptcies.
Consumer filings haven’t exploded despite fewer protections in the second half of 2021, but they could continue to rise if interest fees and inflation remain. The incredible growth of the cost of buying a home, as well as an inflation rate of around 5.48% in 2021 is also hurting people.
Is bankruptcy right for you in times of turbulence?
This is a turbulent time in the economy, but that doesn’t mean that bankruptcies are at a standstill. Instead, they have slowed down for numerous reasons ranging from better consumer protections, delayed payments on debts allowed by lenders and stimulus support. As all of those protections dissipate, people may find themselves struggling with inflation, the cost of goods and repaying debts that they had on forbearance.
If you are dealing with debt, now is a good time to look into your options. You may be able to get yourself into a better financial position by using bankruptcy to eliminate your outstanding qualified debts.