BANKRUPTCY PREDICTIONS FOR 2015
In my 2014 Blog on the state of bankruptcy filings, I discussed the causes of bankruptcy filings and how it was related to the availability and amount of consumer credit. That article is here: https://www.planlaw.com/bankruptcy-predictions-2014-beyond/
Now with 2015 upon us, how is the model of cause and effect playing out? In 2014 it appeared that short term credit was rising which was expected to push down filing rates. As expected, the 2014 numbers show a 12% decline in bankruptcy filings compared to 2013. http://www.acainternational.org/creditors-bankruptcy-filings-decrease-by-12-percent-in-2014-34672.aspx
So how is 2015 going to compare to 2014? It appears that consumer debt is still rising. This article shows that consumer debt increased by over 3% in the third quarter of 2014, or almost $15 Billion. http://www.ttnews.com/articles/basetemplate.aspx?storyid=36997
As expected, after the short term credit bulge, delinquencies are starting to rise. The subprime auto market is especially vulnerable to a dramatic rise in delinquency rates. http://www.wsj.com/articles/car-loans-see-rise-in-missed-payments-1420768083
So based on the availability of credit, what can we expect for 2015? Based on the below chart, it appears that consumer credit has been steadily increasing since 2011 at approximately 4-8% a year. At that rate, the bankruptcy filings should start to pick up during 2015 and accelerate in 2016. This would coincide with a greater amount of consumer debt levels and the gradual tightening of the credit markets as delinquencies start to increase. Of course, real wages remain flat for most workers, making any increased expense difficult to handle. It will be interesting to see if the historical trends continue with the current tepid recovery that has been ongoing in the job market.
| Consumer Credit Outstanding 1 Seasonally adjusted. Billions of dollars except as noted. | |||||||||||||
| Year | Quarter | Month | |||||||||||
| 2013 | 2014 | ||||||||||||
| 2009 | 2010 | 2011 | 2012 | 2013 | Q3 | Q4r | Q1r | Q2 | Q3r | Sepr | Octr | Novp | |
| Total percent change (annual rate)2 | -3.9 | -1.0 | 4.1 | 6.2 | 6.0 | 6.3 | 5.4 | 6.6 | 8.2 | 6.7 | 6.2 | 5.9 | 5.1 |
| Revolving | -8.8 | -7.6 | 0.2 | 0.6 | 1.3 | 0.9 | 2.0 | 1.8 | 6.3 | 2.9 | 2.1 | 2.0 | -1.3 |
| Nonrevolving 3 | -1.0 | 2.7 | 5.9 | 8.6 | 7.9 | 8.5 | 6.7 | 8.5 | 9.0 | 8.1 | 7.7 | 7.3 | 7.5 |
| Total flow (annual rate)2,4 | -103.6 | -25.3 | 108.5 | 169.7 | 174.3 | 190.6 | 164.7 | 205.7 | 259.6 | 214.6 | 200.8 | 191.6 | 169.0 |
| Revolving | -88.0 | -69.7 | 1.8 | 4.9 | 10.9 | 7.5 | 17.1 | 15.7 | 54.4 | 25.8 | 18.8 | 17.7 | -11.4 |
| Nonrevolving 3 | -15.7 | 44.4 | 106.8 | 164.7 | 163.4 | 183.1 | 147.6 | 190.0 | 205.2 | 188.8 | 181.9 | 173.9 | 180.3 |
| Total outstanding | 2,552.8 | 2,647.4 | 2,755.9 | 2,923.6 | 3,097.9 | 3,056.7 | 3,097.9 | 3,149.3 | 3,214.2 | 3,267.9 | 3,267.9 | 3,283.9 | 3,297.9 |
| Revolving | 916.8 | 840.0 | 841.7 | 846.7 | 857.6 | 853.3 | 857.6 | 861.5 | 875.1 | 881.6 | 881.6 | 883.1 | 882.1 |
| Nonrevolving 3 | 1,636.1 | 1,807.4 | 1,914.2 | 2,076.9 | 2,240.3 | 2,203.4 | 2,240.3 | 2,287.8 | 2,339.1 | 2,386.3 | 2,386.3 | 2,400.8 | 2,415.8 |
At Mickler & Mickler, we attend Court on a regular basis. We have the experience and knowledge to ensure that you receive the correct advice when confronted with difficult financial decisions related to filing bankruptcy. Contact us at 904.725.0822 orbkmickler@planlaw.com.
Bryan K. Mickler
