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.
Here are four things to check on as you evaluate your financial health in 2017:
- Emergency Fund: You should have three to six months worth of living expenses socked away in your emergency fund. The total should depend on your own job stability, comfort and attainable goals. Decide how much you need to have in the fund. If you don’t have it yet, start saving.
- Budget: It’s hard to set a budget -- and it’s easy to forget about it. If you’ve been watching your finances, but have, more recently, been splurging on restaurant meals and other incidentals, take stock of your budget, how you’re doing and how you can improve. It’s always good to check in every few months to make sure you’re staying on track.
- Dreams: What are your hopes and dreams for 2017? Will you send a child to college? Do you plan to retire? Do you want to pay off all your debt? Do you need a new car? Make a list of what you hope to accomplish financially in 2017 so you don’t stray off the path that will get you where you want to go.
- Warning Signs: Make sure you are not headed toward a bankruptcy? Signs include the inability to make minimum monthly payments; the use of payday loans to buy food, gas and other basic needs; and credit lines that are at or near their maximum limit. If you need help managing debt, contact CESI for information and support.
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.
The CESI Team is committed to helping you reach your financial goals. If debt keeps you from living the life you dream of, contact us for a free debt analysis today and get started on the road to a brighter future!