An increase in personal bankruptcies may not be a bad thing

U.S. Bankruptcy Court

TEXT OF INTERVIEW

JEREMY HOBSON: Personal bankruptcies were up 9 percent last year -- that's according to the American Bankruptcy Institute. And that's not necessarily a bad thing.

Marketpalce's Scott Tong joins us live from Washington with more. Hi Scott.

SCOTT TONG: Good morning.

HOBSON: So not necessarily a bad thing. What do the numbers tell us?

TONG: 1.5 million Americans declared personal bankruptcy last year. A lot of that 9 percent rise was in the West -- California and Arizona specifically. It is still tough for households out there, many still underwater on their mortgages debt. But here's the turning the page side of that story -- according to economist Mark Zandi at Moody's Analytics:

MARK ZANDI: To some degree it is clearing the proverbial financial decks. People are reducing their debt load. So that frees up their future income to be able to spend more freely. The bad news is people are still under stress. But the good news is that stress is starting to abate. And my guess is next year bankruptcies will be down.

HOBSON: Does that mean the consumer economy will start to turn the corner soon?

TONG: Actually, Mark Zandi thinks it's starting to happen. He sees broader consumer debt and delinquencies inching down, we're all spending more aggressively than the darkest days. But there's a debate. The folks at the National Bankruptcy Institute think the number will actually go up this year.

HOBSON: Marketplace's Scott Tong in Washington, thanks.

TONG: You're welcome.

About the author

Scott Tong is a correspondent for Marketplace’s sustainability desk, with a focus on energy, environment, resources, climate, supply chain and the global economy.

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