Bankruptcy filings jumped on a year-over-year basis in Oct. 2024, totaling 47,104 filings by the end of the month, according to data from Epiq, a provider of U.S. bankruptcy filing data.
The data supports some lenders' fears that high consumer debt levels and rising housing costs could undermine mortgage performance.
“We continue to observe a rise in overall filings, with notable increases in individual filings, reflecting the financial pressures faced by households,” said Michael Hunter, vice president of Epiq AACER. “Factors such as higher consumer loan delinquency rates, increased interest rates, record-high national average mortgage payments, sharp increases in insurance premiums, and overall increased expenses are significantly impacting household budgets, driving the upward trend in bankruptcy filings.”
Individual or personal bankruptcy filings totaled 44,522 in Oct. 2024, registering a 16% increase from last year’s total of 38,278 filings. The month saw a 22% year-over-year jump in individual Chapter 7 filings, of borrowers seeking to discharge unsecured debt.
The month ended with an 8% year-over-year increase in individual Chapter 13 filings, of borrowers looking to discharge unsecured debt, but with a repayment plan for their secured debt, which could include homes in those repayment plans.
October’s total bankruptcy filings marked an 11% increase when compared to the 42,547 total filings recorded in September. Individual filings represented an 11% increase from the previous month’s total of 40,098. Individual Chapter 7s increased 14% and Chapter 13s increased 7% over September’s filings.
Despite ongoing affordability challenges faced by consumers, some mortgage loan originators (MLOs) specialize in helping borrowers who are filing (or have filed) for bankruptcy.
Brian Sacks, branch manager and national mortgage expert at Homebridge Financial Services, spoke with NMP previously about handling bankruptcy cases.
“I view these as what we lend on are accidents waiting to happen,” Sacks said. “It’s far better to deal with someone whose accident has already happened because they can’t file bankruptcy again for another seven years.”
Mortgage rates have steadily increased since mid-September, and October's jobs report clouded many forecasters understanding how the labor market has softened since the Federal Reserve transitioned to cutting interest rates. The Fed will announce its next interest rate decision this Thursday.
“Elevated prices for goods and services, along with higher borrowing costs, compound the economic challenges faced by struggling families and businesses,” said Amy Quackenboss, executive director of the American Bankruptcy Institute (ABI). “Access to bankruptcy is key to consumers and companies looking to alleviate their intensifying debt loads and have a chance for a financial fresh start.”
