Fitch: U.S. personal bankruptcies set for fifth straight annual decline

Annual U.S. personal bankruptcy filings are set for a fifth straight drop, though the rate of decline figures to level off over time as lending guidelines become more lax, according to Fitch Ratings in a new report.

Fitch projects total bankruptcy filings to fall by another 8%-10% in 2015 reflective of a still-positive macro environment. This development comes as aggregate personal bankruptcy filings for 2014 fell over 12% lower year over year, another double digit annual decrease in line with Fitch's full year forecast of a 12%-13% decline. That said, 'the continued loosening of lenders' underwriting guidelines and the increase to consumers' access to credit should begin to slow the pace of the double-digit declines observed over the past four years,' said Managing Director Michael Dean.

U.S. consumer credit rose for the fifth straight year in 2014, topping over $3 trillion on a seasonally adjusted basis. While revolving credit (predominantly credit card usage) has remained relatively flat, there was a more pronounced increase (over 8% last year) in the usage of non-revolving credit. 'Both auto and student loan borrowing are continuing to surge and has grown at a considerable pace to above $2.4 trillion,' said Dean.

Taking this trend into account, Fitch believes 2015 will be another strong year with lower personal bankruptcy filings. 'Reduced interest payments and full employment will take away the incentive for consumers to seek bankruptcy protection,' said Dean. 'Lower gas prices will also help household finances.'