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Credit card debt declines as economy improves

The numbers are in: for the last three years, the number of people filing for bankruptcy, including in Wisconsin, has gone down. There were just over 22,500 filings in the state in 2013, according to U.S. Bankruptcy Court records, a 9.5-percent decrease from 2012. Chapter 7 bankruptcies that can wipe out credit card debt, medical debt and utility bills represent 75 percent of the filings. This year, bankruptcy lawyers expect that filings will remain the same or drop lower.

Although the economic upturn has been slow, it has generated employment and provided income opportunities for more people. Low interest rates and manageable payment amounts have helped small business owners refinance businesses. As a result, lenders are more open to working with borrowers, reducing the chances that borrowers will file for bankruptcy. Lenders are optimistic that the improving economy is giving them the opportunity to improve their own finances.

In 2009 and 2010, the economic downturn brought a surge of bankruptcy filings because of underemployment and unemployment. Since 2011, fewer consumers and businesses have needed to file for bankruptcy.

As economic indicators improve, it does not mean bankruptcy filings will fall off completely. People who have filed for bankruptcy recently have had less credit card debt than those who filed a few years ago. This indicates that unexpected situations such as sudden medical debts and divorce can still result in sudden financial challenges.

An overwhelming amount of credit card or medical debt is difficult to deal with, leading to stress from collection calls and notices and a lowered credit score. Filing for bankruptcy may be the best option but anyone who is thinking about it should consider speaking with a bankruptcy lawyer to determine the best possible option.

Source: Milwaukee-Wisconsin Journal Sentinel, "Improved economy reverses surge in bankruptcy filings," Paul Gores, Jan. 19, 2014

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