Inflation is at record highs. Many are struggling to cover daily living expenses due to the current costs of gas, groceries, utilities, mortgage payments, and other regular monthly bills.
One effect of inflation is an expected rise in bankruptcy filings in 2023. Although bankruptcy declarations have declined recently, credit card debt is at an all-time high as consumers struggle to absorb costs. Those struggling to deal with inflation may soon consider bankruptcy a viable financial solution.
What’s Been Done to Curb Inflation?
According to the Consumer Price Index (CPI), the costs of consumer items are up approximately 7%. This is the highest reported inflation rate since June 1982. Inflation is raising costs from groceries and gasoline to new and used cars, clothing, electricity, furniture, and other goods and services.
The federal government has attempted to curb inflation is by raising interest rates, increasing taxes, and cutting spending. However, raising interest rates also usually slows the economy because people cannot afford the extra costs.
Inflation’s Effect on Bankruptcy
Sadly, inflation is sure to cause more bankruptcy filings as inflation continues to be a cause for concern. Although there has yet to be a significant increase in bankruptcy filings, we expect those numbers to increase exponentially in the coming months.
More Bankruptcies Coming in 2023
Economists anticipate an economic recession in early 2023, which could kick off a substantial number of bankruptcy declarations. With increased inflation, supply chain issues, and excess market liquidity, there is virtually no industry unaffected by inflation.
When people can no longer afford to repay their debts due to exorbitant living costs, they will likely begin to consider their opportunities for financial relief- and bankruptcy may very well be a viable option.
Inflation & Your Current Debts
Inflation’s impact on your debts could make even the most financially responsible family consider bankruptcy. The Federal Reserve will raise lending rates to beat inflation, which will increase the cost for financial institutions.
These lenders will then hike the interest rates on mortgage, auto, and personal loans or other lines of credit. With higher interest rates, it will take longer for consumers to make payments, particularly if they are stuck with debt that does not have a fixed interest rate.
Inflation’s Impact on New Debts
Anyone attempting to get any loan can expect to see high interest rates.
In some cases, including purchasing homes and new vehicles, borrowers may be forced to pay substantially more than the value of the item in question if they hope to secure the home or vehicle in question.
This ultimately makes debt significantly more expensive, particularly when a debtor gets behind on payments or becomes upside down on their loan.
Bankruptcy May Help Those Struggling
Despite increasing inflation rates, bankruptcy could provide an opportunity to get ahead and avoid the harsh implications of sky-high interest rates and debts that aren’t worth their value.
Depending on the type of bankruptcy you go with, you can set up a repayment plan to cover the costs of your debts with a Chapter 13 filing, or you may be able to get many of your debts discharged by declaring Chapter 7.
While there are many negative connotations and myths associated with bankruptcy, it may be worth considering if you are having difficulty keeping up with regular payments due to rising inflation and other factors.
Depending on your situation, declaring bankruptcy might allow you to provide for yourself and your family while finally achieving financial security. For many, the temporary impact on your credit report may be worth it.
Reach Out to an Ohio Bankruptcy Lawyer for Help
If you are interested in avoiding the harsh implications of inflation but are having trouble making ends meet, bankruptcy may be a good option.
Reach out to an experienced bankruptcy lawyer at Luftman, Heck & Associates, LLP, to discuss all your options for financial relief. Schedule a free consultation today when you complete our quick form or call (216) 586-6600.