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The impact of interest rates on bankruptcy

It is likely that many South Carolina residents filed for personal bankruptcy in the wake of the 2008 financial crisis. Official figures reveal that the number of bankruptcy filing shot up by almost 30 percent in 2008 and by 35 percent in 2009 before peaking in 2010. Efforts to stimulate the economy out of recession included keeping interest rates at near historic lows, and the number of personal bankruptcy filings has been going down in recent years.

However, concerns about inflation have led some economists to call for interest rates to be increased. They say that the economy is now strong enough to allow interest rates to return to the levels they were at before the crisis, but some analysts feel that the economy may not be as robust as it appears to be. These cautionary voices point out that many households are barely able to make ends meet, and they believe that a significant increase in interest rates would likely lead to a greater number of personal bankruptcy filings.

Credit cards are often the borrowing of last resort, and consumers with high revolving balances are likely to be among those who will feel the sting of rising interest rates the most. Studies conducted in the United Kingdom indicate that as many as 20 percent of British homeowners could be forced into arrears by an interest rate increase.

Experienced bankruptcy law attorneys will likely understand how an unexpected setback such as an illness, injury or layoff can often lead people into a cycle of debt that can be extremely difficult to escape from. Those facing an unmanageable financial situation have a number of debt relief options available, but separating facts from myths is sometimes a challenge for them. A bankruptcy law attorney could compare filing a Chapter 7 or Chapter 13 bankruptcy with strategies such as debt settlement and loan modification.

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