Falling bankruptcy rate may not be good news

An 8 percent decline in bankruptcy filings this year might appear at first blush to be a positive sign for the economy, but further examination might put the optimism on hold.

The number of bankruptcies may be down because people cannot afford to file and because there is little pressure from creditors to do so, according to David Markiewicz of Cox Newspapers.

The result may be a mass of looming bankruptcy cases, not unlike the shadow foreclosures feared in the real estate business. If the economy does not take a sharp turn for the better, those who have been teetering on the brink of bankruptcy eventually will be forced to file. What the impact of a large number of bankruptcies would be is unclear.

Jack Williams, a Georgia State University law professor who specializes in bankruptcy, said there is no indication that the number of bankruptcies is down as a result of people being better off.

“The economy hasn’t turned,’’ he said, “and, if anything, it may be going back down.’’

In the future, he added, “we’ll see a lot more people who have weathered the storm so far but cannot hold on any longer.’’

The number of bankruptcy petitions likely will rise when the employment situation improves, said Atlanta bankruptcy attorney Matthew Berry. When they are back at work, financially troubled individuals will be able to pay the price to file, and they will have the income to pay their creditors.

 

By Doug Beaton

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