Bankruptcies continued to increase on an annual basis this November, reflecting ongoing affordability constraints not limited to skyrocketing homeowners insurance and higher mortgage rates.
Individual Chapter 7 bankruptcy filings totaled 22,886 last month, a 14% annual increase over Nov. 2023's 20,149 filings, according to bankruptcy data provider Epiq AACER’s latest report.
“The velocity of new filings in November 2024 was down slightly from prior months, as expected, due to fewer business days and the holiday season,” Epiq AACER Vice President Michael Hunter pointed out. “The recent rise of default rates in consumer loans, particularly credit cards and auto loans, reflect continued financial stress among households," a reality mortgage lenders are concerned about.
The 14% increase in Chapter 7 filings was down slightly, however, from October’s 22% annual jump in borrowers seeking to discharge unsecured debt. Total bankruptcy filings were 40,271 in Nov. 2024, a 6% increase from the Nov. 2023 total of 37,907.
"We anticipate the velocity of new filings to increase once the holiday season concludes and expect the new administration’s planned regulatory changes to influence filings into 2025,” Hunter added.
The month ended with a 3% annual decrease in individual Chapter 13 filings, which totaled 14,858, filed by borrowers looking to discharge unsecured debt and set up a repayment plan for secured debt, like homes.
On a monthly basis, total and consumer bankruptcies both decreased 15% from Oct. 2024. Individual chapter 7s decreased 16%, and chapter 13s decreased 13% from October’s filings. Analysts said it’s typical for most types of bankruptcy filings to drop from October to November due to fewer business days.
Foreclosures and loan forbearances often precede or follow bankruptcy filings, as borrowers overwhelmed by debt struggle to make payments. November’s bankruptcy filings follow a 4% increase in foreclosures from Sept. to Oct. 2024, according to property data provider ATTOM’s latest foreclosure report.
“Elevated interest rates, tougher lending terms and increased geopolitical tensions continue to impact the balance sheets of many struggling businesses and families,” American Bankruptcy Institute Executive Director Amy Quackenboss commented. “While still below the levels recorded prior to the pandemic, the steady growth in (bankruptcy) filings reflects the growing financial challenges faced by distressed companies and consumers.”
