Author Topic: Personal loans are ‘growing like a weed,’ a potential warning sign for the U.S.  (Read 705 times)


Fred93

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« Last Edit: November 22, 2019, 07:14:59 PM by Fred93 »

Rob L

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For the "real" data, see the Fed's 3rd quarter report...
https://www.newyorkfed.org/medialibrary/interactives/householdcredit/data/pdf/HHDC_2019Q3.pdf

Thanks for the interesting reference. Pages 17, 30 and 40 there is an abrupt step-wise drop in bankruptcies starting with 06:Q1.
It perfectly aligns with the start of the huge multi-year up-slope in mortgage delinquencies on Pages 25 and 29.
Anyone know why the sharp drop in bankruptcies? Change in the law perhaps?


Fred93

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For the "real" data, see the Fed's 3rd quarter report...
https://www.newyorkfed.org/medialibrary/interactives/householdcredit/data/pdf/HHDC_2019Q3.pdf

Thanks for the interesting reference. Pages 17, 30 and 40 there is an abrupt step-wise drop in bankruptcies starting with 06:Q1.
It perfectly aligns with the start of the huge multi-year up-slope in mortgage delinquencies on Pages 25 and 29.
Anyone know why the sharp drop in bankruptcies? Change in the law perhaps?

The first data point after the discontinuity is 2006Q1.  I did find a few references that talks about a big change in the bankruptcy law in 2005, so I think your theory is correct.

https://bankruptcy.findlaw.com/chapter-7/faq-bankruptcy-law-changes.html

or

https://www.uscourts.gov/news/2018/03/07/just-facts-consumer-bankruptcy-filings-2006-2017
Quote
In 2005, Congress enacted the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), which among other things, instituted a means test for filers to move some away from filing for bankruptcy under Chapter 7 and towards filing under Chapter 13. The goal of the BAPCPA is to have petitioners in Chapter 13 devote disposable income over three to five years to pay unsecured creditors. A person may file for bankruptcy under Chapter 7 only if her or his monthly income over six months prior to filing for bankruptcy is below the state median for a similar household, or if the debtor’s monthly disposable income falls below a threshold established by a statutory means test.

The USCourts document also has numerical data, but there are some difficulties with the data.  The USCourts data is annual, and broken down by chapter 7 vs chapter 13.  The NYFed data is quarterly, and not broken down.  I tried to adjust for this, and I still can't make the numbers match.  Obviously there's something else different between the two data sets.  Both agree that the peak occurred in 2010. 

Rob L

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For the "real" data, see the Fed's 3rd quarter report...
https://www.newyorkfed.org/medialibrary/interactives/householdcredit/data/pdf/HHDC_2019Q3.pdf

Thanks for the interesting reference. Pages 17, 30 and 40 there is an abrupt step-wise drop in bankruptcies starting with 06:Q1.
It perfectly aligns with the start of the huge multi-year up-slope in mortgage delinquencies on Pages 25 and 29.
Anyone know why the sharp drop in bankruptcies? Change in the law perhaps?

The first data point after the discontinuity is 2006Q1.  I did find a few references that talks about a big change in the bankruptcy law in 2005, so I think your theory is correct.

https://bankruptcy.findlaw.com/chapter-7/faq-bankruptcy-law-changes.html

or

https://www.uscourts.gov/news/2018/03/07/just-facts-consumer-bankruptcy-filings-2006-2017
Quote
In 2005, Congress enacted the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), which among other things, instituted a means test for filers to move some away from filing for bankruptcy under Chapter 7 and towards filing under Chapter 13. The goal of the BAPCPA is to have petitioners in Chapter 13 devote disposable income over three to five years to pay unsecured creditors. A person may file for bankruptcy under Chapter 7 only if her or his monthly income over six months prior to filing for bankruptcy is below the state median for a similar household, or if the debtor’s monthly disposable income falls below a threshold established by a statutory means test.

The USCourts document also has numerical data, but there are some difficulties with the data.  The USCourts data is annual, and broken down by chapter 7 vs chapter 13.  The NYFed data is quarterly, and not broken down.  I tried to adjust for this, and I still can't make the numbers match.  Obviously there's something else different between the two data sets.  Both agree that the peak occurred in 2010.

Yeah, the law change must have been the cause. At first blush one might think the number of chapter 7's would have gone down but most of those would have just become chapter 13's. As a theory maybe folks decided if they couldn't file as 7 they wouldn't file at all.