Over the past few years, most Americans have faced financial struggles. In many ways, these have intensified even in the last few months. According to several sources, bankruptcies did increase in 2022. In a recent article, we discussed how common bankruptcy is and found that almost 500,000 people filed in 2021. So, at the end of 2022, we see that defaults are rising. Let’s take a look at some of the reasons why this is the case.
Rising Interest Rates
One of the main ways that have pressured many Americans into filing for bankruptcy has been rising interest rates. Increased interest rates can make things even more difficult for you if you struggle with paying back debt. Even an increase of half a percentage point means qualifying for credit, and repaying debt puts a strain on your financial situation. The Fed has increased interest rates several times in 2022, which has impacted American wallets and pushed many to consider bankruptcy.
Supply Chain Issues
Due to the lingering fallout from the onset of the global coronavirus pandemic, supply chain issues have affected virtually every industry. This means that if you are a business owner, chances are you have felt the strain of not being able to provide your goods and services. For some businesses, this has meant they were forced to shut their doors even once initial lockdown efforts were lifted. Bankruptcy provides a way out for consumers and businesses affected by supply chain issues.
Inflation has also impacted prices in every sector of commerce in America and worldwide. This means that things like gas, which most people rely on to get to work, have increased almost exponentially in just a few months. Groceries and rents have done the same. Since these are all essential expenses, the average family is left buckling under rising costs on a similar salary as before. You might have to put even everyday expenses on a credit card. Debt can quickly rack up as a result. Inflation has been one of the most significant contributors to why bankruptcies are rising.
What Kinds of Bankruptcy Are There?
You can decide between several types of bankruptcies. The most common are chapter 7 and chapter 13, but there is a chapter 11 bankruptcy available only to business organizations. If you are an individual consumer, chapter 7 is often a faster process. You can often expect to have your debt discharged within about six months, give or take. On the other hand, chapter 13 is a more involved process and can take longer to resolve – sometimes up to three to five years.
Companies And Consumers
There are differences in how businesses and individual consumers can file for bankruptcy. As stated above, only companies can file for chapter 11 bankruptcy. Chapter 7 is available to both businesses and individuals. With chapter 13, only sole proprietorships are eligible, meaning LLCs and other incorporated companies would need to file differently.
Filing For Bankruptcy? We Can Help
Do you need help filing for bankruptcy and the legal paperwork that comes with it? The Law Offices of David Brunelle can help discuss your options and walk you through the filing process. Contact us today to get started.