More Consumers Seek Bankruptcy Protection
ALEXANDRIA, Va. — Struggling with high gas prices and the soaring cost of staples, many consumers are treading quickly to keep their heads above the water.
These factors and more added to the recent downfall in the subprime mortgage sector have placed enough pressure on consumers that many appear to be seeking the protection of bankruptcy, forcing filings to surge.
On a positive note, the influx of filers isn't the tsunami that occurred just before the new law went into effect in October 2005 when many larger cities were inundated with 3,000-plus-percent climbs in filings.
However, the Administrative office of U.S. Courts announced late last week that filings jumped by more than 48 percent for the first six months of the year, compared to the same time frame in 2006.
Overall filings hit 404,090, versus 272,604 cases in the first half of last year.
"The new upward trend in bankruptcies reflects the economic reality of households under increasing financial stress," explained Samuel Gerdano, executive director of the American Bankruptcy Institute.
"We expect bankruptcy filings to continue to rise for the balance of 2007," he added.
Breaking down the statistics, filings by individuals or households with consumer debt climbed more than 48 percent to 391,105 for the six-month period, compared with 263,660 filings in the first half of 2006,
The percentage of consumers filing for Chapter 13 protection dropped a bit from 41.15 percent last year to 38.35 percent for the first half of this year.
Looking specifically at Chapter 7, filers grew to 61.58 percent from the 58.7 percent in 2006.
Moreover, the Administrative Office reported that business filings for the period came in at 12,985, up more than 45 percent. Chapter 7 filings grew to 8,404, up 65.21 percent from 5,087 during the first six months of 2006.
Additionally, Chapter 11 reorganizations climbed from 2,370 to 2,713, comparing the first six months of this year to the same period of last year. This equaled a 14.47-percent increase.
One of the bright spots was that the 751,056 filings for the 12-month period ended June 30 was down 49.41 percent from the same time frame last year when they reached almost 1.5 million. Officials pointed out that last year's surge was due to consumers and companies rushing to file before the new law went into effect.
"The bankruptcy filings rate per thousand U.S. residents totaled 2.48 for all chapters during the 12-month period ending June 30, 2007, as 1.49 Americans per thousand filed for Chapter 7, while 0.97 per thousand filed for Chapter 13," officials explained.
Tennessee lead the way with the highest per capita filing rate in the country, hitting 6.03 residents per thousand filing all chapters. Executives also noted that the state had the highest per capita filing rate for Chapter 13 filings at 3.78.
When it came to highest per capita rate for Chapter 7 bankruptcy filings, Indiana was ahead of the pack at 2.98 per thousand for the 12-month period.
Non-business filings for the year came in at 727,167, which was down 50 percent from the nearly 1.5 million the prior year.
Meanwhile, business filings for the period were 23,889, down 24.31 percent from the 31,562 filings in the same time last year.
The 450,332 Chapter 7 filings for the year were down more than 61 percent from the more than 1 million in the same period of 2006. Chapter 13 filings were down 5.87 percent to 294,693 from 313,085. Chapter 11 filings were also down 10.25 percent, coming in at 5,586, compared with 6,224. On the other hand, Chapter 12 filings were up 7.22 percent from 360 to 386 in 2007.
For the three-month period, the Administrative Office said business filings reached 6,705, up 38.02 percent. As for non-business filings for the same period, they increased 34.95 percent to 203,744.