Inflation Is On The Rise, Will Bankruptcy Filings Increase?

Reaching a Better Financial Situation Through Bankruptcy

Unless you are living in the middle of nowhere in an underground compound, you’ve probably noticed that the cost of living has increased sharply within the past year. Gas is well over $5 per gallon, groceries cost more than ever, and housing costs are literally through the roof. Unfortunately, wages don’t seem to be increasing at this same rapid rate. For families that were already living paycheck-to-paycheck, there isn’t much budget flexibility to allow for this sudden increase in the price of everything. You could be among the millions of Americans who are accruing personal debt to make ends meet during this time of inflation. Depending on your unique circumstances, bankruptcy could possibly help your financial situation. Learn more about creating a better financial future through bankruptcy by scheduling your free consultation at 480-833-8000.

What Is Inflation?

Inflation is the rise of costs and prices in general. When inflation goes up, the purchasing price of your dollar goes down. Unless your income increases to keep up with inflation, the amount of disposable income you have available each month will decrease.

Inflation can put you in a tight spot financially. For example, let’s say you spent the last few years saving up for a down payment on a house. You were finally starting to feel like you were getting close, but then the housing market shot through the roof. Your buying power has decreased, and now mortgage interest rates are less favorable.

There is almost always a little bit of inflation. It is normal for prices to gradually increase from year to year. That’s why you might come across entertaining menus or housing listings from decades past, with prices that rival a bill at Starbucks. Problems occur when the rate of inflation increases too much, too quickly. The current rate of inflation is approximately 9.1%. For more context, the inflation rate was 2.3% in 2019 and 1.9% in 2018.

Can We Expect an Influx of Bankruptcy Filings?

When times are tough, many people rely on unsecured debts to make ends meet until they get a new job, inflation subsides, etc. When someone’s debts are largely unsecured and non-priority, they may be a good candidate for bankruptcy. The bankruptcy rate in the United States increased by 31% during the recession of 2008. While there were stimulus checks and other government programs to help reduce the economic effects of the pandemic, inflation is a whole different beast. Lawmakers have already shot down attempts to set limits on gas prices.

Bankruptcy filing rates are actually low at the moment. Business bankruptcy filings fell by 33.7% in 2021, and the overall bankruptcy rate (including consumer bankruptcies) decreased by 24%. Experts attribute these decreases to government benefits like stimulus checks and eviction and foreclosure moratoriums during the pandemic. But most people’s stimulus checks were spent ages ago, and most moratoriums have expired. With the cost of living surging out of control, absent some intervention by the government, we can only expect that filings will begin to increase again.

Is Inflation Affecting You?

Inflation could be affecting you- and your bank account- in several ways. There are very few people who benefit from inflation. You’ve probably noticed inflation increasing many of your expenses. Your groceries are probably more expensive, but food companies have also responded by reducing the quantity per package. For example, a bag of chips you may have been buying for $3.99 has remained the same price, but now contains 9.25 ounces of chips instead of 9.75 ounces. This is a process known as “shrinkflation.” So even if your groceries have managed to remain about the same price, you’re probably headed to the market at least slightly more often than before.

One of the biggest economic issues right now is the price at the pump. Throughout much of Arizona, the price per gallon has soared beyond $5. This price increase can be crippling, depending on the type of car you drive. For someone who is readjusting to commuting after working from home during the pandemic, there simply might not be room in their budget for today’s gas prices.

If you didn’t buy a home in Arizona before 2020, the cost of home ownership is dramatically higher now. Besides buying the home itself, appliances are on backorder, and costs like landscaping and plumbing have increased with inflation. But that doesn’t mean that renting is an affordable alternative in Arizona right now, either. Rental rates increased at nearly 30% in Phoenix in 2021, and are expected to increase at about 20% for 2022. Arizona has no rent control laws capping how much landlords can increase rent per year, unlike many states with large metropolitan areas.

Prices are increasing on just about everything, and chances are, your salary hasn’t been increasing to keep up. If you’re lucky, this only means less money going into your savings account each month. Approximately 64% of American families, or almost two-thirds of the population, live paycheck to paycheck. If you’re currently struggling to make ends meet, know that you aren’t alone.

How Bankruptcy Can Help Someone Struggling Due to Inflation

If your financial situation is turbulent, bankruptcy might be able to get things back under control. You probably already know that Chapter 7 bankruptcy can clear debts like credit cards, medical bills, personal loans, and more. You can also use Chapter 13 to address those debts as well as secured loans and priority debts. But clearing debts isn’t the only reason people file bankruptcy. Many people file bankruptcy because doing so triggers the automatic stay.

The automatic stay is a protection that usually lasts the entirety of your bankruptcy case. It stops your creditors from contacting you, filing lawsuits against you, garnishing your wages, repossessing your house and car, and more. This can be crucial to preserving your financial situation if clearing debts will allow you to afford your current standard of living. Learn more about how the automatic stay can protect you during times of inflation by speaking with a Chandler bankruptcy lawyer.

Affordable Phoenix Bankruptcy Lawyers With Payment Plans Starting as Low as Zero Dollars Down

These are scary times, especially if you’re considering declaring bankruptcy. While bankruptcy has tremendous benefits, it also comes with serious risks if you file your case improperly. For example, the trustee could seize some of your assets to pay off your creditors, or your case could be temporarily dismissed and give your creditors the opportunity to repossess one of your assets. A skilled bankruptcy attorney will make sure none of these types of hiccups happen in your case. And with our affordable payment plans, you may be able to get your case filed sooner than you previously thought.

At Arizona Zero Down Bankruptcy, our experienced lawyers know just how tough it can be for clients to pay for their bankruptcy filings up front. That’s why we offered qualified clients the opportunity to file for zero dollars down. Pay for your bankruptcy in wallet-friendly, post-filing installments that can even help improve your credit score. Your payment plan comes with a 0% interest rate. To learn more, call to schedule your free consultation with our dedicated bankruptcy team at 480-833-8000.