Personal Bankruptcy Rates Reach Pre-Reform Rate

Personal bankruptcy rates for the third quarter of this year are predicted to reach roughly the levels they were at before the spike of bankrupticies that preceded the most recent overhaul of the bankruptcy laws in an anti-debtor direction.

Unlike business bankruptcies, consumer bankruptcy rates more closely track consumer debt levels than the economic business cycle. Given declining levels of consumer debt, this quarter or the next may be a peak in bankruptcy filings, after which we may see them fall to a level lower than seen in the wake of the October 2005 bankruptcy reform. Bankruptcy filings have increased every quarter since the extreme post-bankruptcy reform low in the first quarter of 2006.