More bad news for the economy: After declining for the last 16 months, personal bankruptcies will spike in 2013, potentially drowning the lackluster economy in debt if the frightening prediction of a surge in additional home foreclosures comes true.
Our source is reliable, not a conservative or liberal pundit or even an economic modeler from the Federal Reserve. It’s the nation’s top administrative judge who is using actual bankruptcy filing statistics to predict a looming economic horror show.
Julia Gibbons, chair of the Judicial Conference of the United States, which manages 400 federal courts, said that bankruptcies went through “several years of explosive growth” recently, jumping 35 percent in 2009 and 20 percent in 2010, before declining last year. She said that filings should drop 11 percent to a still eye-popping 1,361,400 this year.
But it won’t continue, she warned House appropriators last week. “Our projections assume consumer debt levels will begin to climb again, resulting in more bankruptcies in 2013. In addition, if home foreclosures increase, then bankruptcies will grow at an even faster pace than the level we are projecting in 2013.”
The economy is the No. 1 issue in the campaign and President Obama and the GOP are fighting over which way they see the nation headed. Obama’s campaign believes the economy is on the upswing, but the GOP, backed by the new bankruptcy fears, say things look grim.
And for those who file bankruptcy, the wait for a settlement is likely to grow even longer, according to her colleague, Judge Thomas Hogan, director of the administrative office of the U.S. courts. In urging Congress to cut his budget less in fiscal 2013, he noted that contracts for 27 temporary bankruptcy judges, or about 10 percent of all bankruptcy judges, will soon “expire,” greatly impacting the work of the bankruptcy court system.
