Gerdano expects the number of bankruptcies to continue rising in the months ahead as unemployment holds near 10% and access to credit remains tight.
Personal bankruptcy filings have been climbing steadily since 2007, when the U.S. fell into a deep recession that has left millions of Americans unemployed. The economy has improved but with sluggish growth, and the recovery in the labor market has been painfully slow.
The number of non-business bankruptcies filed last year is the highest since fiscal year 2005, when over 1.7 million personal bankruptcies were filed. The spike in 2005 came just before Congress amended the bankruptcy code, making it harder for Americans to complete the process, which sparked a rush to file before the changes took effect.
The Bankruptcy Abuse Prevention and Consumer Protection Act of five years ago made it harder for individuals to receive Chapter 7 bankruptcy protection, in part by increasing the costs associated with filing. Chapter 7 is designed to give individual debtors a "fresh financial start" by liquidating assets and discharging debts.
In fiscal 2010, Chapter 7 filings spiked nearly 15% to over 1.1 million, from 989,227 in fiscal 2009. Chapter 13 filings, in which debtors are typically required to repay debts according to a budget plan that the court sets up, rose 9.2% in the year. Chapter 11 filings fell 3.8%.
Meanwhile, business filings decreased slightly in fiscal 2010, according to the Courts. Bankruptcies filed by a corporation or partnership totaled 58,322, down 0.7% from the 58,721 business filings in 2009.
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