Bankruptcy filings drop in New Mexico, but is that a good sign?
Fewer people are filing for bankruptcy in New Mexico recently, but it is unclear whether that indicates an overall improvement in the state's financial situation.
Compared with the same time period in 2013, bankruptcy filings were down by about 8 percent in the first five months of 2014, according to data from the New Mexico Bankruptcy Court. Nationwide, the dip in bankruptcy filings was even more substantial at about 12 percent.
Unfortunately and perhaps counterintuitively, joblessness may be one factor in the declining bankruptcy rate. During periods of unemployment, some people may actually be less inclined to file for bankruptcy than when they are working. Thus, some experts predict that bankruptcy filings will rise as the nation continues its economic recovery.
Unemployment and bankruptcy
One reason for this seemingly paradoxical situation is that, without an income or substantial assets to protect from creditors, some indebted individuals may feel they have little to lose by staying in debt. Once they find work and begin earning money again, they may be more likely to consider bankruptcy if they find that their debts still outstrip their ability to pay.
Creditors also play a role in this phenomenon. When a debt collector knows that someone is out of work and truly has no ability to pay, they may be less aggressive in their attempts to collect from that individual. Once the debtor goes back to work, the bill collectors will often reinvigorate their efforts, believing they have something to gain.
When borrowers are faced with the reality of collection calls, wage garnishment or even creditor lawsuits, they may feel more motivated to take the step of looking into bankruptcy as a way to get out of debt and put an end to these problems.
Get legal advice for dealing with debt
Bankruptcy is not the right solution for everyone who is struggling with debt, but for many people it can offer a path back to a healthier financial lifestyle. There are different types of bankruptcy for different situations, and it is a good idea for anyone considering bankruptcy to talk to a lawyer about their options.
An attorney with a background in bankruptcy law can help clients understand the benefits and drawbacks of each type of bankruptcy and find the right match for their individual circumstances. If it turns out that bankruptcy is not a good fit for their needs, a lawyer can also help clients explore other options for getting out of debt.