Following the recession, the number of consumer bankruptcy filings in 2010 is at the highest level since the bankruptcy laws were reformed in 2005. However, recent trends show that bankruptcy filings are slowing.
In fact, there were 114,587 personal bankruptcy filings in the United States in November, representing a 13 percent decrease from the number of filings in October. Still, the number of bankruptcy filings in November was 2.2 percent greater than in November 2009. Further, there will be an estimated 1.6 million bankruptcy filings in 2010 by the end of year. This will be the highest number of filings since the bankruptcy system overhaul five years ago.
The American Bankruptcy Institute released these figures based on data from the National Bankruptcy Research Center.
However, the number of bankruptcy filings is beginning to taper off. This could be explained by more cautious financial behavior by consumers. According to Samuel Gerdano, executive director of the American Bankruptcy Institute, when individuals rely on budgets and forego credit, there tends to be a leveling off or decrease in the number of bankruptcy filings.
The effects of the recession are still driving many consumers to seek a fresh financial start through bankruptcy protection, however. The lending freeze has left many consumers unable to obtain new sources of credit to pay off their existing debt. Also, job losses have been another significant factor. In a 2009 survey of individuals filing for bankruptcy, 65 percent listed a reduced income as the reason for filing. Also, 42 percent of respondents said they were filing for bankruptcy because of the loss of a job.
Source: The Wall Street Journal, “Personal Bankruptcy Filings Slowing but High,” Sara Murray, 1 December 2010