September 19, 2008 As the economy continues to struggle, one indicator, among a few, keeps rising nearly every month: bankruptcy filings. With continued job losses, medical payments and other financial pressures have pushed an increasing number of Americans to the courts in search of protection from creditors.
Bankruptcy filings surged 29% in the 12 months that ended June 30, according to government figures. Total filings rose to 967,831 from 751,056 a year earlier. Business filings jumped more than 41% to 33,822 from 23,889 in the year-ago period. Personal filings totaled 934,009 up 28% from last year.
Despite the tougher requirements, there is "a growing trend of U.S. consumers to seek bankruptcy as a way out of financial problems," said American Bankruptcy Institute (ABI) Executive Director Samuel Gerdano. The ABI expects filings to reach 1.2 million this year, as problems in the housing market have "reverberated throughout the economy," Jack Williams, an analyst with ABI stated.
The data also showed that filings for Chapter 7 rose 36% to 615,748 in the 12 months that ended June 30. Chapter 7 bankruptcy is designed to give individual debtors a "fresh start" by discharging many of their debts. Under Chapter 7 a filer's assets minus those exempted by his home state are liquidated and given to creditors first in line for repayment, while the rest of the debts are canceled.
The data also showed that filings for Chapter 13 rose 17% to 344,421 from 294,693 a year earlier. Chapter 13 bankruptcy is designed to give individual debtors time to pay back their debts.
The data also showed that filings for Chapter 11 rose more than 30% to 7,293. Chapter 11 bankruptcy, is aimed at assisting struggling corporations or partnerships.
Yet bankruptcy isn't a magical solution for many people. It won't give everyone the clean financial slate they envisioned. Not all types of debts can be discharged in bankruptcy proceedings. Debts such as child support, student loans, taxes, and alimony, along with criminal fines and restitution can not be discharged.