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Spike In Consumer Bankruptcy Predicted

April 6, 2005
As inflation picks up and interest rates rise, millions of consumers may face economic disaster, according to a just-released study. Global Insight, Inc., a private forecasting company predicts personal bankruptcy rates in the U.S. will rise a dramatic 11.3 percent between 2004 and 2007.

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Global Insight's study projects that after a lull in recent years, annual bankruptcy filings in the U.S. will increase to more than 1.74 million in 2007. It cites rising interest rates and inflation combined with slower income growth and housing appreciation as the primary culprits.

Nevada, Maryland, New Jersey, Virginia and Utah will experience the most significant increases in bankruptcy filings, driven by differences in regional economic growth and fluctuations in single-family home market values.

"We can see clearly the connection between economic conditions and bankruptcy filings," said Mark Lauritano, managing director of Global Insight's Financial Practice. "In the next few years, as interest rates rise and recent income gains begin to slow, consumer debt burdens will increase both in dollar terms and as a percentage of income. These debt burdens will drive bankruptcy filing rates up."

Global Insight developed a proprietary econometric forecasting model specifically for this study and used it to model bankruptcy filings at the national, state and county level.

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