Consumer bankruptcies jump 34%
Bankruptcy filings spike in July as households are squeezed by unemployment.
NEW YORK (CNNMoney.com) -- Consumer bankruptcies surged in July to their highest level since October 2005 as U.S. households struggle under the burden of past debt and rising unemployment.
Total filings reached 126,434 in July, a 34.3% increase from the same period a year ago and an 8.7% increase over June, according to a report released Tuesday from the the American Bankruptcy Institute.
The number of filings was the highest monthly total since the Bankruptcy Abuse Prevention and Consumer Protection Act went into effect in October 2005.
"Today's bankruptcy filing number reflects the sustained and growing financial stress on U.S. households," said ABI Executive Director Samuel J. Gerdano in a written statement.
Fewer jobs, less income: Without a job, consumers are hard pressed to pay their bills as their debt climbs.
"Rising unemployment on top of high pre-existing debt burdens is a formula for higher bankruptcies through the end of this year," said Gerdano.
The unemployment rate currently stands at 9.5%, a 26-year high. And the job market doesn't look to be improving anytime soon. The government releases July jobs numbers on Friday, and unemployment is expected to rise to 9.6%, according to a consensus estimate of analysts polled by Briefing.com.
Those people who do have jobs aren't seeing their incomes increase. According to a government report released Tuesday, incomes eased 0.1% in June and were essentially flat in May, excluding the impact of government stimulus. Meanwhile, spending ticked up 0.4%.
Of the bankruptcy filings in July, 28.3% were Chapter 13 cases where the consumer in financial trouble sets up a payment plan to get caught up on the debts.