Monday, January 12, 2009

2008 Bankruptcy Filings Increase by One-Third

Update: As of November 16, 2011 a recent report by the American Bankruptcy Institute, September 2011 saw 18% fewer bankruptcy filings than September 2010. Nationwide we're down approximately 7% year over year. I guess this is good news to some extent but I'd like to see data on the poverty numbers year over year as well to see what the average income per household is now in order to see how much budgets have been tightened due to the sluggish economy.

According to a recent article in USA Today, U.S. consumer bankruptcy filings jumped nearly 33% in 2008 during a recession that's expected to keep filings rising into 2009.

Overall consumer bankruptcy filings reached more than 1 million in 2008, an increase from about 800,000 in 2007. 

The recession that started in December of 2007 has caused many consumers to turn to bankruptcy protection in the midst of major job losses, increased personal debt and mortgage foreclosures.

The 2008 rate of increase was below the 40% rise in 2007, and the annual total in both those years is still less that the 2 million recorded in 2005 alone.  A law that took effect in October 2005 made personal bankruptcy filings more difficult and curtailed filings in 2006 to approximately 575,000, the lowest since 1998. 

The 2005 law mandated an income test to measure a debtor's ability to repay obligations.  Consumers deemed to have insufficient assets or income can still eliminate debts through a Chapter 7 bankruptcy. But those with income above their state's medican income who can pay at least $6,000 over five years are forced into Chapter 13, where a debt repayment plan is ordered.