Do Bankruptcies Go Up In A Bad Economy or Down In A Good Economy?

This post is not based on specific statistics, but on my many years observing the cycles of the economy and their effects on people needing bankruptcies.

Contrary to popular belief, bankruptcy filings do not necessarily go up or down with the economy. Sometimes, during good times, bankruptcies go up because there is more credit extended, and when the causes of bankruptcies (discussed below) occur, there is more debt and more need to discharge that debt when people cannot pay it back.

Conversely, sometimes bankruptcies do not go up when the economy is bad. When people are out of work, they sometimes lose the motivation, or cannot afford, a bankruptcy, so they wait until things improve, and then file to take advantage of the improvement debt free.

The real reason people file bankruptcies is not so much the ups and downs of the economy, but because of real life personal problems that occur regardless of the state of the economy such as job loss, divorce, health problems, kid problems, problems with elderly parents, small business problems, and real estate problems. If a person experiences any of these problems, or a combination thereof, AND they have debts with interest charges that just keep building, a bankruptcy may be a necessary tool to fix their problems, and get a fresh financial start.

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