There are a lot of reasons why the government would like to make employment figures look better than they are. And it’s not necessarily a partisan thing, it’s just a fact of when bureaucrats are in charge of reporting data, they like for it to look good. Governments are trying to increase their power all the time and, so, one of the ways to do that is to make data look good.

But ADP came out with their private-sector report showing a loss of 157,000 jobs in October. That was far and above September’s mild report of 8,000 jobs lost, which was subsequently revised to 26,000. ADP said that we could see monthly job losses totaling around 200,000 jobs per month in the near future. And when you have unemployment increasing throughout next year, that’s going to be an issue that really starts to ratchet up the pain on Main Street.

Cory Bortnicker: Okay. Let’s talk a little bit about bankruptcy. U.S. consumer bankruptcy filings soared 40 percent in October, which sounds like quite a lot. What are your thoughts about this new figure?

Kevin Depew: The American Bankruptcy Institute, when they reported that figure, noted that it was the first time since 2005, when the bankruptcy bill was in the process of being passed, where there was a large spike in bankruptcy filings. At that time it was because people sought to get in under the wire of stricter requirements for filing bankruptcy.

And what’s interesting to me about that is that we’re starting to see an increase in bankruptcy filings, despite the fact that the whole purpose of the American -- what did they call it? -- the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act, it makes it a lot tougher to qualify for Chapter 7, which is the full discharge. And a lot of people are finding that based on their mean income in their state that they’re getting kicked up to Chapter 13, which only allows them to discharge a certain amount of their debt. 

To me, this was another sign of consumer stress increasing in the economy. It’s going to get worse. We’re going to have increasing job losses and credit will continue to tighten. People have been living from month to month, paycheck to paycheck.

In actuality, there are a lot of bankruptcy attorneys who are saying that the extent of credit card debt has actually enabled people to avoid filing bankruptcy for a long time.

Cory Bortnicker: Can you talk a little bit about that? How does that work?

Kevin Depew: This was really interesting to me because, you know, the normal thing is when you see somebody who’s filed for bankruptcy, and they have 25,000, 30,000, 50,000 dollars in credit card debt, well, the perception is that clearly they went out and they were living above their means. That’s not really the case.

Bankruptcy attorneys are saying that the majority of people who are coming in and filing for bankruptcy with that kind of credit card debt, it’s due to groceries, day-to-day expenses, medical bills. There’s a large percentage of these that are due to increases in prescription drug costs that are not covered by their current health insurance, or they lose their health insurance and lose that benefit, and combined with an increase in the cost of the drug itself are forced to buy healthcare necessities on credit.

I was reading about a bankruptcy attorney talking about a specific case where a couple in their late fifties, they were both diabetic and they saw their monthly increase in prescription drug costs go from $400 a month to $1,900 a month. So that was all going on the credit card. They tried to make it as long as they could, hoping for a solution, and then ran out of time.

Cory Bortnicker: So this is interesting. Essentially, what you’re saying is the kinds of people who are filing for bankruptcy now are very different from those who, say, may have been filing in the ‘90s. The causes for bankruptcy are now very more real?

Kevin Depew: Well, absolutely. I think the stress is more real. That credit card debt has, ironically, masked a lot of the stress in the economy because people have been able to meet their day-to-day expenses using credit cards.

When you read the Visa (V) and MasterCard (MA) quarterly reports they’re all saying that they’re seeing an increase in consumption that is day-to-day: groceries, gasoline, bills that can be paid online with a credit card. Even the IRS now allows you to pay your taxes with a credit card. All of these things are going on a credit card.

There’s no question there are some people who are going to abuse the bankruptcy system. But credit has a role in that too. The credit card companies, they have a role in that as well. So it’s not simply the case that the increase in bankruptcies is due to the fact there are a lot of people out there who are abusing the bankruptcy system. That’s absurd.

Cory Bortnicker: Okay. We’ve got time for just one more question. In your column on Wednesday, you used the term, “the credit-thawing myth.” What is that myth?

Kevin Depew: Well, here’s the next thing that we’re we're going to see happen. The next shoe to fall is that credit card companies are now finding that they are shut out of the market for bonds backed by customer payments. In fact, there were none of these bonds issued in October of this year, while compared to October of last year there were 17.1 billion of this debt that was issued. So now that’s frozen. No one wants to buy that debt. The net result of that is that the cost of credit for consumers is going to go up. It just makes it more expensive for banks and credit card companies to fund loans to consumers, and that’s what we’re seeing now.

Cory Bortnicker: All right. Well, thank you very much, Kevin. And thank you for listening. We will be back next week with more of “5 Things You Need To Know: The Podcast.” Take care.