Bankruptcies surge to 5-year high
The consumer bankruptcy filings, coupled with stubbornly high foreclosure numbers, paint a picture of a consumer still struggling to get footing.
There was more evidence this week that economic recovery has yet to find much traction -- at least for consumers. The number of U.S. bankruptcy filings has risen to levels not seen since 2005, when changes to the bankruptcy law took effect.
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Bankruptcy filings rose 20% in the 12-month period ending June 30, according to the Administrative Office of the U.S. Courts. A total of 1.57 million bankruptcy cases were filed in federal courts in that period, compared with 1.3 million in the 12-month period ending June 30, 2009.
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This is the highest number of bankruptcy filings for any period since many of the provisions of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 took effect, the report said. The 2005 law made bankruptcy a much less favorable option for consumers, resulting in a drop in filings.
More about the numbers:
- Non-business or consumer filings for the 12-month period ending June 30 totaled 1.51 million, up 21% from the previous year.
- Business filings totaled 59,608, up 8%.
In the 12-month period ending June 30, increased filings were seen in all bankruptcy chapters:
- Chapter 7 filings totaled 1.13 million, up 25%.
- Chapter 13 filings totaled 424,242, up 10%.
- Chapter 11 filings totaled 14,272, up 2%.
- Chapter 12 filings rose 56% to 660.
Bankruptcy filings in the April-June period totaled 422,061, the highest quarter so far in fiscal year 2010 (Oct. 1, 2009, through Sept. 30, 2010) and the highest for any April-June quarter since the 2005 third-quarter filings.
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Some workers lose up to a quarter of their paychecks paying off old debt from credit cards, medical bills and student loans, as well as child support.
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