Personal bankruptcies surge 9%

Number of Americans filing for bankruptcy continues to climb. Total bankruptcies expected to top 1.4 million in 2009, highest in 4 years.

EMAIL  |   PRINT  |   SHARE  |   RSS
 
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)
By Hibah Yousuf, CNNMoney.com staff reporter

Unemployed -- without a lifeline
In July, CNNMoney.com told the stories of 4 out-of-work Americans who had just lost their unemployment benefits. Here's where they are today.
Map
How stimulus will help your state
The Obama administration says the Recovery Act created or saved 640,000 jobs through September. Here's a state-by-state breakdown.
What should U.S. nuclear power policy be?
  • It's a safe, clean alternative right now
  • More safety testing is needed
  • We shouldn't use it

NEW YORK (CNNMoney.com) -- The number of Americans filing personal bankruptcies surged 9% in October and were on target for the highest annual total in four years, according to a report issued Wednesday.

The American Bankruptcy Institute, an industry research firm that relies on data from the National Bankruptcy Research Center, said 135,914 consumers filed for bankruptcy last month. Almost a third of the bankruptcies were filed under Chapter 13, in which consumers are put on a repayment plan of up to five years.

"The nearly 9% increase in consumer bankruptcy filings in October, together with a 7% jump reported in business cases, demonstrates the sustained stress on the U.S. economy," said ABI executive director Samuel Gerdano.

The group forecasts total bankruptcies to exceed 1.4 million in 2009, which would be the highest since 2005. It would also be an increase of at least 30% from last year.

"People are still carrying a lot of debt in terms of credit cards and home equity loans, and unemployment is still rising," said Maureen Thompson, legislative director for the National Association of Consumer Bankruptcy Attorneys in Washington. "All of those factors are hitting consumers at the exact same time."

While some Americans are able to survive by tapping into savings and retirement funds, Thompson said many middle-income families are struggling after becoming unemployed for longer than anticipated. And with their homes values lower, interest rates creeping higher and credit lines reducing, they are being forced to declare bankruptcy.

The last time bankruptcies were this high was due to a change in the law rather than deteriorating economic circumstances. In October 2005, Congress implemented legislation making it harder for consumers to prove that they should be allowed to clear their debts in a Chapter 7 bankruptcy, forcing more to file under Chapter 13.

To dodge the change, Americans rushed to file for bankruptcy in the months before the law went into effect.

Thompson said an economy that puts people back to work will begin to lower the number of Americans filing for bankruptcy, but she is "not expecting the numbers to turn around in the foreseeable future." To top of page

Features
They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
More Galleries
2015 Mustang's asphalt-peeling power goes modern The new Ford Mustang has been upgraded and updated to compete globally - but never fear, it's still a monster. More
15 top executives with $1 salaries Some CEOs and founders agree to salaries of just $1 a year. But once goodies like bonuses and stock options are added in, some of those executives end up taking home many millions of dollars a year. More
Mercedes SL65 AMG: 621 horses of topless power Turn heads as you blow by traffic in this roadster convertible from Mercedes. More
Worry about the hackers you don't know 
Crime syndicates and government organizations pose a much greater cyber threat than renegade hacker groups like Anonymous. Play
GE CEO: Bringing jobs back to the U.S. 
Jeff Immelt says the U.S. is a cost competitive market for advanced manufacturing and that GE is bringing jobs back from Mexico. Play
Hamster wheel and wedgie-powered transit 
Red Bull Creation challenges hackers and engineers to invent new modes of transportation. Play

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.