NEW YORK--(BUSINESS WIRE)--

Fitch believes personal bankruptcy filings are likely to decline by 11% for the current year. The expectation follows data indicating that filings in first half of this year were running well below initial expectations. According to The National Bankruptcy Research Center (NBKRC), U.S. personal bankruptcy filings decreased by 13% in the first half of this year

The drop in bankruptcy filings is having a direct and positive impact on consumer asset-backed securities (ABS), particularly in the credit card sector, by holding many risk measures at cyclical lows. We expect performance to hold at or near current levels through the end of the year. Bankruptcy filings typically comprise approximately 30%-40% of overall credit card chargeoff results and the improvements are helping offset unemployment pressures for consumers.

We believe the pace of improvement will level off later this year, as banks appear to have begun loosening underwriting standards recently. Consumer borrowing rose by $17.1 billion in May from April, according to the Federal Reserve. That pushed total borrowing to a seasonally adjusted $2.57 trillion, approaching the high reached in July 2008. Increases over the previous 18 months had been attributed to auto and student loans, while credit card usage declined or stayed the same. That abruptly changed in May when credit card debt increased by $8 billion, its largest one-month jump in nearly five years.

The decline in bankruptcy applications began in 2011, after four years of increases. In 2010, NBKRC reported 1.5 million filings. That was the highest level since 2005, when the Bankruptcy Abuse Prevention and Consumer Protection Act reduced the likelihood and amount of discharged debt in personal bankruptcy cases. In 2011, amid signs of slow improvement in the labor and real estate markets, personal filings declined by 11.6% to 1,353,186. The improvements in bankruptcies have come amid a pullback in consumer credit usage and overall reduction in household debt.

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Fitch: U.S. Personal Bankruptcy Expected to Drop by 11% in 2012