Harbinger of Recession: US Bankruptcy Rises Steadily

The level of bankruptcy in the United States is growing, indicating that more and more Americans are mired in debt, especially in large cities such as New York.

Фото: Depositphotos

While the total number of bankruptcy petitions across the country by consumers and enterprises is still well below the level of the Great Recession of the 2008 of the year, analysts say there is a steady upward trend, writes New York Post.

For example, New York State bankruptcy filings have steadily increased over the past three years, reaching 34 711 in 2018 compared to 30 112 in 2016, according to the American Bankruptcy Institute (ABI).

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More and more consumers across the country are not managing their debts and declaring bankruptcy in order to get rid of excessive debt burden. At the same time, low unemployment, rising average wages and the recent Fed interest rate cuts do not hold back the American debt monster. Some poor consumers have even encountered problems in providing themselves with the usual level of food.

“In expensive cities like New York, personal income is not always enough to pay household bills. We see people cutting back on food purchases as a way to make ends meet when they come here,” said Zach Hall, vice president of poverty programs at the New York City Food Bank.

Unmanageable debt is also forcing more companies to file for bankruptcy, triggering a wave of job cuts—nearly 43 jobs were lost due to bankruptcy in the first seven months of this year, according to a report from Challenger, Gray & Christmas. That's nearly 000% more than all of the bankruptcy-related job cuts in 20.

According to data released by ABI last week, the number of bankruptcy filings in the United States increased by 3% in July 2019 compared to July 2018. In total, this July 64 283 applications were registered compared to 62 241 in July 2018. And if this trend continues, then this year the total number of bankruptcies will reach 796 000, which is much higher than the 777 000 recorded over the past year.

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Meanwhile, US household debt reached a record 14 trillion dollars, including mortgages and student loans, which is about 1 a trillion dollars higher than during the Great 2008 recession of the year. Credit card debt of 1 trillion dollars also exceeds the peak recorded in 2008 year.

Americans, again, spend a lot of money - and often recklessly, analysts say.

“There is no doubt that credit quality is deteriorating,” said Dick Bove, financial strategist at Odeon Capital Group in New York.

Beauvais noted that US banks began to abolish the more stringent lending and underwriting standards that followed the 2008 financial crisis of the year, which led banks to clear toxic debt portfolios.

“Now the world has changed, so I am sure that the level of bankruptcies, unfortunately, will increase,” the expert noted.

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