As we approach the end of 2025, our firm at Leiden & Leiden has noticed financial trends that give cause for concern going forward. Some of these trends are like those which preceded the “Great Recession”, approximately 17 years ago. While this does not mean that our economy is headed for another recession, it is obvious that many lenders and some borrowers are ignoring the lessons of the past. DÉJÀ VU ALL OVER AGAIN These are some of the trends that we have observed to date, and we will continue to monitor these trends as we begin 2026.

Mortgage payments as a percentage of household income have increased. There are multiple reasons for this increase, some of which are unavoidable. As property values increased during the local housing boom, property taxes and homeowners’ insurance followed along. Because these expenses are escrowed, when they increased, the mortgage payments increased as well. But it also appears that new borrowers and/or first-time borrowers received loans with monthly payments that would have exceeded the comfort level of most lenders five years ago. The Consumer Finance Stress Test: Factors that the Experts Believe Add to Your Financial Vulnerability While there is not much risk to lenders if properties continue to increase in value, the local markets already appear to have cooled. We talk to consumers on a routine basis whose mortgage payments greatly exceed the IRS housing standards for properties in the Augusta area.

The average duration of an automobile loan now extends beyond 60 months, with most automobile lenders offering 72-month and 84-month loans. If the borrower on a long-term loan is not making a significant down payment, either in the form of cash or a paid-for trade-in, then they will be underwater on their vehicle loan for almost the entire length of the loan. This will make it difficult if not impossible to sell the vehicle, and the owners will roll that negative equity into another purchase if they buy a replacement before the loan is satisfied. Drive It or Dump It? When It Makes Sense to Keep a Car in Bankruptcy, or Let It Go If the consumer does not have GAP insurance, they run the risk of a large residual balance on the vehicle loan if it is totaled in a collision or catastrophe. THE IMPORTANCE OF HAVING ADEQUATE AUTOMOBILE INSURANCE And in addition to being liable on the residual balance, they still must obtain replacement transportation, with any new financing coming at a higher cost.

A related trend is that automobile loan defaults are increasing, especially within the first 24 months of purchase. Some of the delinquencies may be related to employment changes, while others may be traced to the unaffordability of the loan payments at the time that the vehicle was financed. Going back to Hurricane Helene, there were many people who had vehicles that were paid for and then had no choice but to finance a vehicle out of desperation and add a monthly vehicle payment to their budget because their previous vehicle was totaled.

Creditors have become more aggressive with debt collection. Whether in the form of communications with consumers, including phone calls, letters or text messages, or the filing of lawsuits and initiation of garnishments, our consultations are all reporting a universal increase in the frequency and duration of collection activity. When Should You Consider Filing for Bankruptcy? It also appears that creditors, especially those with debts that are significantly in default, are resorting to litigation earlier in the collection process. IF A CREDITOR HAS A JUDGMENT AGAINST ME, CAN THEY TAKE MY SOURCES OF INCOME?

Foreclosures have increased. Foreclosure Many of the post – Covid homeowner protection programs have lapsed, and lenders feel comfortable that they will recover all of their money from the sale of their collateral. Because the housing boom yielded an increase in property values, fewer properties were underwater than in the past. Because of the house value increases, mortgage lenders were not concerned about the ability to sell their collateral for more than the loan amount, even when the loans were significantly delinquent.

Obviously, these observations are based on our discussions with people who are financially distressed and may not be universal when compared to lenders and borrowers in general. But all of these issues bear watching, as they have been signals of impending economic trouble in the past. If you are struggling with your finances and see that some of these trends apply to you, it may be a good idea to contact us to schedule a free bankruptcy consultation. What to Expect on Your First Visit to a Bankruptcy Attorney