More consumers filed for bankruptcy in March than in any other month after Congress overhauled federal bankruptcy laws in 2005, according to a release by the American Bankruptcy Institute.
Monthly filings for March reached 149,268, a 34 percent increase from the month before when filings totaled 111,693, and a 23 percent year-over-year increase when consumers submitted 121,413 filings, the institute said. The findings are based on data from the National Bankruptcy Research Center.
"The sustained economic pressures of unemployment, coupled with high pre-existing debt burdens, are a formula for consumer filings to surpass 1.5 million filings," said Samuel J. Gerdano, the institute’s executive director.
"As consumers continue to look to bankruptcy for financial shelter, annual filings will likely equal those averaged in the years leading up to the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005."
In 2005, bankruptcy filings exceeded 2 million, a record high. After a sharp drop-off to fewer than 600,000 filings in 2006, filings rose to about 800,000 in 2007, and passed 1 million in 2008. Last year’s filings rose to about 1.4 million. To see 2009 bankruptcy statistics and a heat map of states most affected by bankruptcies last year, click here.
The 2005 overhaul aimed to discourage consumers from filing for Chapter 7 bankruptcy, which liquidates assets to pay off creditors and discharges unsecured debt, in part by applying a "means" test making it harder for the consumer to qualify.
Instead, those seeking bankruptcy protection could file Chapter 13 bankruptcy, which sets up a debt repayment plan in exchange for getting to keep certain assets and is available to individuals with regular income whose debts do not surpass specific amounts.
In defiance of that goal, Chapter 13 cases have fallen steadily since 2005. They made up 25 percent of filings in March, the institute said. In a February report, the research center found bankruptcy filings amounted to about one in every 530 households
Inman News examined the long-term impacts of bankruptcies and foreclosure on the housing market in a special report, "Rebuilding Homeownership."
What’s your opinion? Leave your comments below or send a letter to the editor.