Fitch Ratings is forecasting that U.S. personal bankruptcy filings are likely to decline by 11% for the current year.
The ratings agency is basing this prediction on data indicating that filings in first half of this year were running below initial expectations. According to the National Bankruptcy Research Center (NBKRC), U.S. personal bankruptcy filings decreased by 13% in the first half of this year.
‘We believe the pace of improvement will level off later this year, as banks appear to have begun loosening underwriting standards recently,’ says Fitch Ratings. ‘Consumer borrowing rose by $17.1 billion in May from April, according to the Federal Reserve. That pushed total borrowing to a seasonally adjusted $2.57 trillion, approaching the high reached in July 2008. Increases over the previous 18 months had been attributed to auto and student loans, while credit card usage declined or stayed the same. That abruptly changed in May when credit card debt increased by $8 billion, its largest one-month jump in nearly five years.’
In 2010, the NBKRC reported 1.5 million filings, which was the highest level since 2005, when the Bankruptcy Abuse Prevention and Consumer Protection Act reduced the likelihood and amount of discharged debt in personal bankruptcy cases. In 2011, personal filings declined by 11.6% to 1,353,186, which Fitch Ratings attributes to signs of slow improvement in the labor and real estate markets.