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Economic forces behind current decline in bankruptcy filings

The latest report about bankruptcy filings produced by Supreme Court Chief Justice John Roberts indicated that filings have reached their lowest number since 2010. Prior to 2010, consumers had sought bankruptcy protection in increasing numbers due to the financial collapse of 2007 and 2008. Although debts remain a concern for many people in Texas, multiple economic forces appear to be reducing the caseloads at bankruptcy courts.

One attorney speculated that the passage of the Affordable Care Act spared some people the burden of medical bills that they could not pay because they gained access to medical coverage. The foreclosure crisis that accompanied the Great Recession also led to government programs that aided distressed homeowners. These federal programs encouraged lenders to work out new payment plans with borrowers. As a result, fewer people needed to file for bankruptcy due to their inability to make house payments.

Massive amounts of student loan debts that have reached $1.5 trillion nationwide might also reduce bankruptcy filings. Although student loans significantly restrict the finances of many people, the law prevents them from discharging these debts in bankruptcy unless they can show an undue hardship. The debt load on student borrowers therefore appears to restrict their access to credit overall.

The drop of bankruptcy filings, however, does not mean that no one struggles with debts anymore. People overwhelmed by debts or a loss of regular income might still gain a fresh financial start by filing for bankruptcy. The representation of an attorney may prepare a person to approach a court and seek relief. An attorney might explain whether the person qualifies for Chapter 7 or Chapter 13 protection. To reduce the chance of delays or a denial, an attorney may help the person accurately disclose all finances to the court.

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