Government statistics demonstrate that bankruptcy filings fell by 0.7% last year, marking the smallest 12-month decline since 2010. Based strictly on these numbers, bankruptcy filings are up. During the recession and its immediate aftermath, bankruptcy filings soared. As the economy moved in a different direction and things improved, bankruptcy filings saw a steady decline. 2017 continued on this trend but the decline was not as sharp, suggesting that perhaps economic health is not as good as believed.

Other economic signs seem inconsistent. The stock market has seen severs drops and wild swings, holding at around net zero for the year. Concurrently, unemployment is way down and wages have gone up. The signs are confusing. This article discusses some of these issues from a bankruptcy standpoint.

Retailers v. Consumers

Recently, retailer bankruptcies spiked considerably. Experts predict a continuing trend in such bankruptcies. Currently, large retailers like Toys R Us, Radioshack, Hhgregg, Gymboree, and Bon-ton are in Chapter 11, along with others. According to Business Insider, retailers such as Sears, Claire’s, Vince, Bebe, Steinmart, and Destination Maternity are facing financial difficulty and may find themselves in bankruptcy this year.

Experts point to the expansion of technology as the reason for retailer troubles. They say that people shop online where they can compare prices from multiple websites. They also go to stores and look at their smartphones to see if the store is offering the best deal. At the same time, with an increase in wages, retailers are paying more to staff. The confluence of those two factors has hit retailers hard.

At the same time, consumer bankruptcies have not spiked. The smaller decline may be attributable, in many ways, to the increase in retail bankruptcies while consumer bankruptcy remains flat.

Risk Tolerance

Another significant factor in bankruptcy filings is risk tolerance. That is to say, higher risk tolerance leads to more risk taking, which, in turn, leads to more bankruptcy filings.

There are two economic models wherein bankruptcies escalate – during deep economic difficulty and very strong economies. Bankruptcy filings soared during the Great Recession because the economy was in big trouble. People purchased houses that they could not afford; people refinanced to buy luxury items or go on vacation but had no means of paying for the mortgage and the luxuries. During strong economic times, people are more willing to take risks. While high risks usually lead to high rewards, high risk also leads to significant failure. People may invest in a risky proposition during a good economy because they believe, with so much money floating around the economy, that such a venture is almost a lock to be successful. When it does not succeed, bankruptcy is often an option.

In a similar vein, lenders to small businesses often require that the business owner provide a personal guarantee for a loan. Businesses owners often feel compelled to personally guarantee the money. When it does not work out and the lender comes collecting from the owner, he or she would often file bankruptcy to stave off creditors. This is a common scenario despite good economic times.

In debt, bankruptcy may be just what you need. Contact the debt relief law firm of Melanie Tavare, a Bay-area bankruptcy attorney.