If you thought that claiming Chapter 13 bankruptcy is harmful to the economy, it’s time to think again. A 2015 study published in the American Economic Review showed that bankruptcy could actually help the economy.
What the Study Found
This study analyzed 500,000 bankruptcy filings against administrative tax and foreclosure information to determine the economic impact of Chapter 13 bankruptcy, and provided some interesting findings. Over a five-year period after filing Chapter 13, it was found that the average filers’:
- Marginal baseline income increased by $5,562
- Employment increased by 6.8 percent
- Foreclosure rates fell by 19.1 percent
- Mortality fell by 1.2 percent
Higher employment rates, fewer home foreclosures and more disposable income all contribute to a healthier economy.
What Chapter 13 Bankruptcy Can Do for You
If you do have a regular income, chapter 13 bankruptcy can allow you to pay all or part of your debts and at the end of the process, eliminate most if not all unpaid debt. You would work with your lawyer to propose a repayment plan to the bankruptcy court, which allows you to make payments over three to five years to your creditors.
It’s important to note that the study does not conclude your life will improve upon filing bankruptcy. Rather, the researchers conclude that bankruptcy, on average, prevented the filers’ situations from deteriorating further. In other words, bankruptcy could be viewed as a form of economic harm reduction.
Learn whether Chapter 13 is right for you by contacting the Law Office of Larry Karandreas today for a free consultation.