Debt Articles Debt Relief Industry Forecasts and Trends

Bankruptcy Filings Down in 2012. Continued Bad News for Debt Relief Industry.

Written by Steve Rhode

The latest statistics out from the United States Courts show that bankruptcy filings are dropping. That’s good news for consumers and bad news for companies that sell debt relief services.

According to filing data, the number of non-business bankruptcy filings for the same year-on-year period ending September 30 has significantly dropped.

Chapter 7 bankruptcy filling dropped from 1,036,950 to 874,337. That a decrease of almost 16 percent.

Chapter 13 bankruptcy filings dropped from 417,530 to 375,521. A decrease of about 10 percent.

Non-business bankruptcy filings in total were down from 1,467,221 to 1,261,140. A decrease of filings of 14 percent.

Chapter 7 bankruptcy filing as of September 30, 2012 account for about 67 percent of all consumer bankruptcy filings. Clearly still the vast majority.

As of September 30, 2012 the three states with the highest incidence of bankruptcy filings is: – Source

  1. Nevada
  2. Tennessee
  3. Georgia

The three lowest are:

  1. Alaska
  2. District of Columbia
  3. North Dakota

Even the month-on-month numbers look like there is a decreasing demand for consumer bankruptcy protection. This in combination with the historically low consumer credit default rates, certainly paints a picture that we may have reached the bottom of the decline for debt relief services and the demand to solve massive problem debt from the recession. The only residual factor would be if there remained a backlog of consumers that might still turn, in higher than usual numbers, to a chapter 13 bankruptcy to deal with a still ongoing mortgage problem.

If we look at the change in demand for both chapter 7 and chapter 13 bankruptcy from November, 2011 to September, 2012 we can see that in general the month on month reduction in demand for each chapter. As you can see in the accompanying chart, the demand in reduction is spending more time in the positive area. A positive number reflects a reduction in filings from the month before.

While it is doubtful that in the next decade or so we will see debt relief service demand at the levels experienced in 2009-2010, we should see a greater demand in the next three to five years. It will just take time to reload the consumer debt pipeline.

Even consumer default rates continue to decline. Numbers out from Discover just today state the default rate in September is down 1.5 percent from the same period a year ago.

As statistics begin to show us there is an increased demand and use of unsecured consumer credit and rebounding consumer confidence, it will signal a return to people loading up on debt again. This will lead to a greater demand for debt relief services in the future.

But the latest statistics out from the Federal Reserve today show that revolving credit decreased at an annual rate of 1-1/2 percent, while nonrevolving credit increased 6-1/2 percent.

We need to keep our eyes on the growing balances of essentially secured private student loan debt as part of nonrevolving debt. As those levels increase it will prevent consumers from indulging in as much unsecured credit as before. This will put a damper on consumption and the need for debt relief services like credit counseling and debt settlement.


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READ  Bankruptcy Filings Down in June 2013

About the author

Steve Rhode

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.


  • You guys arent really claiming that every consumer that Freedom enrolled should have filed Bankruptcy…..are you?

    • No but they should stop sending out deceptive marketing flyers from their sister company Rescue One Financial…in Irvine…promising a loan …which is not the truth..Bait & Switch tactics used…not FTC Compliant…falls under the heading of DECEPTIVE ADVERTISING….

    • Not about doing the right thing for the consumer it is about lining the pockets of Rescue One Financial & Freedom Debt Relief off the backs of consumers in a hardship…never about doing the right thing for the consumer…which is what it should be about instead of destroying consumers credit rating & promising loan never happens…

      • Im not a fan of Freedom, I dont think they do a good enough job of screening and qualifying consumers and they should offer other options so they are not accused of putting a square peg in a round hole so I am not defending them by no means; but is it really deceptive to target consumers who are looking for loans and to capture those who do not realize that they will never qualify for any other loan than a $1000 cash advance/payday loan?

        This is the exact stage of debt that DMP programs were created for and if you follow that thought you will also see that within that category there are consumers who have accounts that are already charged off which then puts them in the settlement stage of debt.

        Sounds to me like a creative marketing strategy to be able to offer multiple solutions depending on the consumers financial situation.

        Unfortunately, as long as Freedom is advancing fees to its affiliates those affiliates will continue to sell settlement programs to unqualified consumers who are better suited for DMP or Bankruptcy. This is where the deception is, not in the silly mailers meant to get the phones ringing. Whats sad is that they have the ability to set precedence by doing the right thing but they just cant seem to get it right.

        • Agreed … do the right thing rescue one financial …stop sending out deceptive mailers…be honest when be call you….what is so hard about can you trust a company who lies on the first phone call…

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