The American Bankruptcy Institute had some good news to share early this year: In 2016, the total number of bankruptcy filings dropped 6 percent when compared to 2015.
Commercial filings did rise -- by 26 percent, according to the nonpartisan group that’s dedicated to research and issues related to bankruptcies. But, overall, there are plenty of reasons to celebrate.
“While commercial filings increased last year, total filings fell for a seventh consecutive year and bankruptcies decreased to their lowest number recorded since 2006,” said the group’s Executive Director Samuel J. Gerdano in a press release.
Still, the good news doesn’t mean consumers should throw caution to the wind. In December, the Federal Reserve increased its benchmark interest rate, a move that’s expected to be repeated in 2017.
What do those rate hikes mean for consumers? Over time, experts say more rate hikes will trigger increases in mortgage rates, some credit card’s annual percentage rates, government student loan rates, auto loans and rent prices.
That means the cost of living could shoot up, making it more difficult for some consumers to stay afloat and eventually force them to consider bankruptcy.
“As the Fed raises rates in 2017 and the cost of borrowing increases, more debt-burdened consumers and businesses may seek the financial shelter of bankruptcy,” the institute’s Gerdano said in the release.
In other words, if you’ve been living on a tight budget, now isn’t the time to start loosening the reins.
A drop in bankruptcies is great news for American consumers. By making smart money decisions, consumers can continue to fend off insolvency regardless of interest rate hikes and Federal Reserve decisions.
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