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As unemployment drops, Chapter 13 bankruptcies could increase

Even though many experts claim that the economy is on the rebound - evidenced by lower rates of bankruptcy filing - a growing number of officials are arguing that 2014 could be a banner year for debt relief. Lower unemployment rates could actually spark new Chapter 13 bankruptcy filings this year, according to experts.

For those who are unemployed or underemployed, making payments may not seem as important, as they have few assets to protect from creditors. When those individuals find profitable employment, they suddenly acquire more assets, and they want to hold onto them. As a result, bankruptcy filings could shoot up in the coming months, thanks to the rapidly declining unemployment statistics.

Experts in Chapter 13 bankruptcy say that newly employed individuals may be weaning themselves off of unemployment and Social Security, which means that they have more personal assets that could be seized in a lawsuit from creditors. Borrowers with unpaid credit card debt could have their wages garnished, for instance, if they do not seek the financial protection that accompanies bankruptcy processes.

Other factors that could play a role include increased availability of home and auto loans for individuals with low- to moderate-range credit scores; those individuals had been ineligible for borrowing after the 2008 financial crash. Now that more spending is occurring, bankruptcies are also likely to increase, according to experts, who predict rapid growth in purchases of items such as vehicles and home appliances.

Nationwide, bankruptcies dropped about 12 percent from 2012 to 2013, according to statistics from the American Bankruptcy Institute. The approximately 988,000 bankruptcies filed in 2013 is a significant change from even three years ago, when 1.53 million Americans sought protection through the bankruptcy court system.

Pennsylvania residents who are experiencing rapid financial changes because of a job change situation may benefit from Chapter 13 bankruptcy proceedings. Individuals who are interested in learning more about their financial and legal options may benefit from a consultation with a qualified bankruptcy attorney.

Source: The Tennessean, "Bankruptcy decline could reverse amid better jobs picture" Jamie McGee, Jan. 12, 2014

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Joshua Z. Goldblum, Attorney at Law
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