Bankruptcies Surge Among Gen X and Millennials
Millennials Struggle To Repay Debt As Rates, Balances Spike
Jan 25, 2024 at 2:46 PM EST
By Alexander Fabino
Reporter, Economy & Finance
An uptick in bankruptcy assistance among Generation X and Millennials signals a burgeoning debt crisis, overshadowing recent economic optimism, legal experts told Newsweek.
In contrast to recently issued positive economic data showing a 29 percent surge in consumer confidence since November, LegalShield’s December Consumer Stress Legal Index (CSLI) documents a relentless rise in financial duress, reaching a three-year peak as consumers seek legal help for bankruptcy and other legal assistance. The data, drawn from over 35 million legal service requests, is forecasting a dip in that consumer confidence, and exposes a groundswell of fiscal challenges.
The trend, disproportionately impacting younger generations, points to a latent economic strain that macroeconomic figures may not fully capture, which hints at a potential credit reckoning on the horizon.
It’s reflected in broader economic data. U.S. household debt has seen an increase, rising 1.3 percent in the third quarter of last year to a record $17.29 trillion. The uptick was propelled by increases across mortgage, auto loan, credit card, and student loan balances, according to the Federal Reserve Bank of New York.
According to LegalShield’s data, there’s been a notable 24.7 percent increase in Gen X and a 40.1 percent surge among Millennials reaching out for bankruptcy assistance year over year. That surge causes friction with broader economic indicators, according to LegalShield’s SVP of Consumer Analytics Matt Layton, suggesting that the generations, aged between 44-59 and 27-42, respectively, may be the canary in the coal mine for looming credit challenges.
“People don’t call attorneys unless they are genuinely worried about something,” Layton said in a statement shared with Newsweek via email. “This is not a survey with leading questions or prompts about the economy; these are real concerns from real people who sought out affordable legal advice to take action.”
Their December CSLI report surged to 66.7, the highest since November 2020, suggesting a disquieting trend sitting at odds with otherwise optimistic economic reports. The peak in December completes a sustained 10-month climb, according to Layton, and comes with significant implications for consumer behavior.
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According to LegalShield CEO Warren Schlichting, despite positive macroeconomic signs, the company’s data reveals a “concerning rise in consumer debt struggles—from bankruptcies to car repossessions.”
The legal services data, a real-time pulse on a portion of American financial health, suggests that the façade of a robust economy might be masking deeper issues of debt and credit that the generations are now facing.
“Our Consumer Stress Legal Index has historically preceded financial challenges by 60-90 days,” Layton said in the statement shared with Newsweek. “The rise in consumer stress in contrast to increased spending may point to an even sharper rise in household debt in the coming months.”
With the Federal Reserve’s interest rate hikes beginning to bite, according to LegalShield’s data showing the rise in the CSLI coinciding with the Fed’s hikes, the Gen X and Millennial cohorts, already saddled with significant debt burdens, are finding themselves on a precarious financial footing.
Source: Newsweek
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