Bankruptcy Filings See Slight Decline in Key New England States
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Bankruptcy Filings See Slight Decline in Key New England States

February 23, 2012

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The number of bankruptcies filed by consumers recently dropped by several percentage points in both Massachusetts and Connecticut, which paralleled a rise in employment in both New England states.

The number of people filing for personal bankruptcy in Massachusetts, for example, fell by 16 percent from 2010 to 2011, according to a real estate report analyzed by the Boston Herald.

In 2010, 17,496 consumers in the Bay State filed for Chapter 7 bankruptcy, while 2011 saw only 14,716 Chapter 7 filings in Massachusetts, representing a steady but significant decline in filings. Filings for Chapter 13 bankruptcy dropped from 5,392 in 2010 to just 4,813 in 2011.

Mirroring the national trend, in which Chapter 7 accounts for the majority of bankruptcy filings, almost 75 percent of filers in Massachusetts last year opted for Chapter 7 bankruptcy, which is also known as “liquidation” bankruptcy because filers sometimes sell some property to appease creditors.

In Chapter 7, however, many forms of property are exempt from liquidation sales, including Social Security benefits, disability relief, and certain amounts of cash. According to Timothy Warren Jr., the CEO of Warren Group, the drop in bankruptcy filings "indicates that consumers are more optimistic about their ability to pay off debt and clean up their financial situations."

Warren also noted that the decrease in bankruptcy filings corresponded with a lower unemployment rate in the Bay State. As more residents find employment, they are more likely to be able to repay their debts.

Connecticut has also recently experienced a drop in its unemployment rate, as well as a corresponding decline in its number of bankruptcy filings. The number of personal bankruptcy filings in Connecticut dropped by 14 percent in 2011, as only 8,518 residents sought bankruptcy relief, compared with 9,887 filers in 2010, according to a report from the Ridgefield Press.

Bankruptcy filings in Connecticut peaked in the second quarter of 2011, and then dropped significantly during the second half of the year. And, while Chapter 7 bankruptcy accounted for almost three-fourths of filings in Massachusetts, filers in Connecticut opted for Chapter 7 bankruptcy in 89 percent of the state’s filings in 2011.


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