Fitch Ratings Says Personal Bankruptcies Could Decline Further in 2012

Fitch Ratings forecast that personal bankruptcies could decline by 11 percent by the end of 2012, according to Mortgage Orb.

“We believe the pace of improvement will level off later this year as banks appear to have begun loosening their underwriting standards, recently,” Fitch says, “Increases over the previous 18 months had been attributed to auto and student loans, while credit card usage declined or stayed the same.”

If the first half of the year is any indication, which declined by 13 percent, according to the National Bankruptcy Research Center (NBKRC), personal bankruptcies will run below initial expectations.

In 2010, the NBKRC reported 1.5 million bankruptcy filings, the largest increase since 2005 when the Bankruptcy Abuse and Prevention Act made it more difficult to reduce or dismiss the amount a debtor owes. This act also made it nearly impossible to get debt relief for student loans, though lawmakers are currently considering a change that would allow bankruptcy protection for loans issued by private lenders.

Bankruptcies in 2011 also declined which Fitch attributed to improvement in real estate and employment.

The two leading causes of personal bankruptcy, unemployment and medical bills, are still a major problem. Though Fitch’s predicts an improvement in filings it is likely that many people will still need the assistance of bankruptcy attorney to help them shed their financial burdens.

Bankruptcy may not seem like the ideal choice and should be considered carefully, but many people have benefited from a Chapter 13 ‘reorganization,’ or Chapter 7 ‘liquidation.’ Both of these debt protection plans pave the way for a better financial future.