Opinion | Americans households are about to get hit by a devastating wave of bankruptcies. By Sushrut Jain and George Korenko of EdgeworthAnlytx.
This crisis, however, has yet to roll over into a second wave of consumer bankruptcy filings, with fewer than 40,000 reported in April – a ten-year low for the month.
Per data from the Bureau of Labor Statistics and American Bankruptcy Institute, there is a near-perfect correlation between the quarterly individual bankruptcy and unemployment rates since 2006. Considering the current drastic unemployment spike, a bankruptcy surge is almost certain to follow. During the Great Recession, many lenders turned off access to credit like mortgages for riskier borrowers. If these lenders use the same restrictive measures during the pandemic, it would only serve to boost consumer bankruptcies by leaving less-qualified borrowers with no other options.
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