U.S. bankruptcy rates increased last year, report says

U.S. personal bankruptcy rate rises

The number of Americans who went bankrupt last year reached 1.53 million, up 9 percent from 2009, the American Bankruptcy Institute and the National Bankruptcy Research Center said in a report today. In 2009, there were 1,407,788 filings.

The upward trend in personal bankruptcy filings started in 2005 when a major revision of bankruptcy law was implemented. The ABI said personal debt and economic woes contributed to the rise in bankruptcies.

"The steady climb of consumer filings nothwithstanding the 2005 bankruptcy law restrictions demonstrate that families continue to turn to bankruptcy as a result of high debt burdens and stagnant income growth," the institute's executive director Samuel Gerdano said in a statement. The worst month was December, when 118,146 filings were made, after a slowdown in October and November, the report said. Southwestern states registered the most number of bankruptcies. Filings in California jumped 25 percent from 2009 while Arizona leapt 24 percent.

Americans are more optimistic that they will be able to stave off bankruptcy this year as the economic recovery gains momentum and their debt is lessened.

In 2005, bankruptcy rules were revamped that made it tougher for consumers to get rid of debt. It was designed to get more debtors to switch from Chapter 7 into Chapter 13 where they could get a repayment scheme instead of having assets forfeited then their debts wiped clean under Chapter 7.

During the past three years, consumer bankruptcy filings have reached about 4 million. According to the Institute for Financial Literacy, the majority of those who filed did not finish college, but middle-class households and those with college degrees were growing in number.

Posted by James Fried on Tuesday January 04 2011, 12:33 AM EDT. Ref: CNN. All trademarks acknowledged. Filed under Featured News, Finance. Comments and Trackbacks closed. Follow responses: RSS 2.0