According to the American Bankruptcy Institute, the number of consumer bankruptcy filings jumped 14% in 2010’s first half, to its highest level since the bankruptcy code overhaul, nearly five years ago. The total number of filings climbed from 675,351 to 770,117 according to ABI which cited collected data from the National Bankruptcy Research Center.
The American Bankruptcy Institute’s Executive Director, Sam Gerdano, attributed the jump to years of steadily climbing, consumer debts and miniscule savings rates. When mixed in with our country’s high unemployment and ongoing housing difficulties, it all helps to better understand and follow what’s truly going on here. Gerdano estimates over 1.6 million new bankruptcy filings, for all of this year, 2010.
Analysts and experts alike will tell you bankruptcies typically peak between six to 18 months after a failing economy bottoms out completely. Most seek court protection only after first pursuing other avenues in effort to erase their debt.
Chapter 13 filings made up 26% of all May 2010 filings—a slight increase from April’s number; a vast majority of the filings (74%) were Chapter 7 related. When one files under Chapter 13, as long as the debtor has a source of income, they may restructure payments and reorganize. When filing under Chapter 7—liquidation, unsecured debts can possibly be discharged.
Given today’s times, more often than not, consumers are choosing to liquidate for numerous reasons including not having enough money to pay their mortgage. As well, should a debtor be unemployed, and has no source of income, Chapter 13 can not be utilized.
As long as jobless rates remain the same and people, with little to no assistance, struggle to pay off debts, their mortgage and make various other payments, the number of bankruptcy filings shall continue to serve as our nation’s barometer—letting us all know how we’re doing.