Filing Bankruptcy is an Increasingly Popular Option
By: Gerri L. Elder
It may come as no surprise to many, but new statistics indicate that more and more Americans are in serious financial trouble and that the rate of people filing bankruptcy in federal courts across the country is continuing to rise.
On October 17, 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) went into effect and tightened the restrictions on filing bankruptcy. However, despite the new income limits and an increased fee to file bankruptcy, many people find that it is still the best option to resolve unmanageable debts that have consumed their lives and prevented them from moving forward financially.
In 2006 there was a drop in the number of people filing bankruptcy, but by 2007 that number had risen by 38 percent, according to a report by the United Press International. Economic experts say that the number of people filing bankruptcy has been influenced by the general poor state of the U.S. economy. Declining wages, rising costs of food and gas, inadequate health insurance and job instability have all contributed to the increase of personal bankruptcy filings. Revolving consumer debt is also piling up for many Americans with the average adult owing $4,246 in credit card debt and the average household in the United States owing $8,218 in revolving consumer debt, according to a study released by Indexcreditcards.com, which analyzed government debt and Census data.
According to statistics released on June 3, 2008 by the Administrative Office of the U.S. Courts, the number of people filing bankruptcy in federal courts for the 12-month period ending on March 31, 2008 was 901,927. This represents an increase of 30 percent more people filing bankruptcy than in the previous 12 months. Statistics representing bankruptcy filings through the end of March show that more people were busy filing bankruptcy in September 2007 than any other time since 2006.
Most of the bankruptcy filings reported represent non-business debts and were personal bankruptcies. The rate of personal bankruptcies rose 29 percent in the 12 month reporting period as compared to the previous 12 months. According to a report by WRDW News, Chapter 7 bankruptcies to discharge all non-secured debt rose 36 percent, Chapter 13 bankruptcy filings were up by 21 percent and Chapter 11 bankruptcies increased by 34 percent.
The Chicago Tribune reported that the number of people filing bankruptcy in Illinois rose by 27.2 percent in the first quarter of 2008 while business bankruptcies jumped up by 14.5 percent.
Nationwide, the total number of people and businesses filing bankruptcy increased by 26.9 percent during the same time period. This marks the ninth consecutive quarterly increase in the number of people and businesses filing bankruptcy in all bankruptcy court districts since the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 went into effect.