Indeed, in Q3 2023 LegalShield’s Consumer Stress Index reached its highest level since March 2020. This jump is the clearest indication yet of the newfound economic squeeze being felt by American consumers. The index measures the overall index economy and the mind and shows very worrisome signs in the consumer debt economic and bankruptcy inquiry trends. As households continue to face increasing fiscal pressures, the costs of rising student debt on consumption and long-term economic prosperity are becoming more ominous.
The Consumer Stress Legal Index (CSLI) shows that the Bankruptcy Index has jumped to historic levels. It made a huge leap from 34.7 to 37.7 since July! This increase is a key indication that more people are at risk of filing for bankruptcy as they can no longer cope with their debt burdens. The new report paints a picture of alarming increase in consumer debt. It has skyrocketed from $4.15 trillion in 2020 to more than $5 trillion today.
The economic pressure is incredible. Credit cards these days have an average APR of 19.98 percent, with some companies charging sky-high rates of 28 percent. The impact on the bottom-income portion of the population is especially acute. Their spending has flat-lined in real terms. Furthermore, the top 20 percent of consumers drive almost two-thirds of all consumption. Within this group, those in the top 3.3 percent are experiencing the biggest growth rates in their expenditures.
Consumer debt is through the roof. In Q3 2023, the total debt flow into serious delinquency increased to 3.03 percent, a historically notable increase from 1.68 percent one year ago. These kinds of numbers help us realize how many families are barely hanging on to their level of accountability. LegalShield’s findings tell us that the everyday Americans are already at their breaking point.
“People are drowning in this economic state we’re in – so much to pay for with prices constantly increasing and credit cards with exorbitant interest rates, everyday Americans are running out of options. Bankruptcy is their last lifeline.” – A Kansas City attorney
Our new Consumer Stress Index uncovers an alarming trend. This subindex alone has spiked by 13.9 percent since last year, indicating rising consumer panic about current and expected financial circumstances. LegalShield cautions that bankruptcy searches usually peak around six months prior to formal bankruptcy filings. In other words, because of now-failed conditions, the new trend may lead to an unprecedented wave of bankruptcy cases in early 2026.
A spokesperson from LegalShield remarked on the dire circumstances facing consumers: “If current trends continue, actual bankruptcy filings are likely to rise in early 2026. While a recent Federal Reserve rate cut offers modest relief, elevated debt levels and ongoing delinquencies suggest that consumer stress will likely remain high heading into the holiday season.”
The inability to meet these crippling costs has thrown millions of families into what some researchers are calling “crisis mode. The triple crisis of skyrocketing cost of living, including interest-based liabilities or debts, have left millions feeling inescapably staked. And as they deal with soaring costs for everyday necessities, the risk of evaporating consumer demand grows.
As we start approaching the end of the year, this is the big question. Would this legal stress cause a drop in property tax spending? Just as consumers are forced to consider the prices they pay for goods and services, businesses would likely be looking at a more unstable market environment.
“The question now is whether this consumer legal stress translates into a pullback in spending in the final quarter of 2025.” – A LegalShield spokesperson
LegalShield’s first-ever report highlights the ongoing financial stress of American households as they help themselves through this tough economic period. Soaring consumer debt and interest rates are crimping families from coast to coast. At the same time, stagnating wages only increase the financial burden, painting a dire picture for scores of Americans.