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NM bankruptcy filings drop in 2015

Biz00_jd_19jan_bankruptcy_NMALBUQUERQUE, N.M. — Bankruptcy filings dropped for the fifth consecutive year in New Mexico in 2015, reflecting a pattern around the country, according to the clerk’s office of U.S. Bankruptcy Court in Albuquerque.

Last year’s 3,458 bankruptcies in the state marked a 9.7 percent drop from 3,830 in 2014. Nationwide, bankruptcies dropped by an estimated 10 percent over the same period, Kansas City, Kan.-based Epiq Systems reported.

The five-year trend of dropping bankruptcies is generally considered a sign of a slow economy, when consumer confidence and credit availability tend to be low.

Bankruptcies tend to rise when credit is easy to obtain, which is usually a characteristic of economic booms, thus enabling some consumers to build up the kind of debt levels that can lead to financial insolvency and eventual bankruptcy.

As tracked by the Federal Reserve, outstanding consumer credit can fluctuate from month to month but historically has gotten bigger with each passing year. That all changed with the credit crunch, triggered in late 2008 by the collapse of Lehman Brothers.

Revolving consumer credit, which is mostly credit card debt, plunged by an unprecedented 16 percent in 2009-10 and has yet to recover. As of November, revolving credit amounted to $903.1 billion, the highest it’s been since December 2009.

Credit card debt is a common thread in many consumer bankruptcies, which make up about 97 percent of all bankruptcies filed annually in New Mexico and around the country. Credit cards are often used as a last resort to pay bills when an individual or household is facing insolvency.

Total consumer credit has recovered from recession-driven lows of 2008-09, reaching an all-time high of $3,504.9 billion in November. Most consumer credit comes in the form of one-time loans, also called nonrevolving credit, most commonly used to buy a vehicle or fund a college education.

Consumer credit does not cover loans secured by real estate, such as a mortgage on a house.