Three years into the seasonally adjusted
"recovery" and 1 in every 201 Americans
file for bankruptcy.
January 3, 2011, Alexandria, Va.— U.S. consumer bankruptcies increased 9 percent nationwide in 2010 from the previous year, according to the American Bankruptcy Institute (ABI)relying on data from the National Bankruptcy Research Center (NBKRC). The data showed that the overall consumer filing total for the 2010 calendar year (Jan. 1 – Dec. 31, 2010) reached 1,530,078 compared to the 1,407,788 total consumer filings recorded during 2009. Annual consumer filings have increased each year since the Bankruptcy Abuse Prevention and Consumer Prevention Act was enacted in 2005.
“The steady climb of consumer filings notwithstanding the 2005 bankruptcy law restrictions demonstrate that families continue to turn to bankruptcy as a result of high debt burdens and stagnant income growth,” said ABI Executive Director Samuel J. Gerdano. “We expect that consumer filings will continue to rise in 2011.”
NBKRC’s data also showed that the 118,146 consumer filings recorded in December 2010 represented a 4 percent increase from the 113,274 filings in December 2009. The December 2010 consumer filings also represented a 3 percent increase from the November 2010 total of 114,587. Chapter 13 filings constituted 30 percent of all consumer cases in December, a slight increase from November. Annual Bankruptcies Recao
- Chapter 7 of the Bankruptcy Code is available to both individual and business debtors. Its purpose is to achieve a fair distribution to creditors of the debtor’s available non-exempt property. Unsecured debts not reaffirmed are discharged, providing a fresh financial start.
- Chapter 11 of the Bankruptcy Code is available for both business and consumer debtors. Its purpose is to rehabilitate a business as a going concern or reorganize an individual’s finances through a court-approved reorganization plan.
- Chapter 12 of the Bankruptcy Code is designed to give special debt relief to a family farmer with regular income from farming.
- Chapter 13 of the Bankruptcy Code is available for an individual with regular income whose debts do not exceed specific amounts; it is typically used to budget some of the debtor’s future earnings under a plan through which unsecured creditors are paid in whole or in part.
Ed Soapes, 53 years old, of Corona, Calif., filed for bankruptcy protection in September 2010, after losing his job as an estimator for a construction company in February. He said he now relied on his and a daughter's disability benefits to pay the bills in a household that also includes two other children—one in college, one unemployed—and his mother. Mr. Soapes's filing listed more than $150,000 in debts, including a mortgage that he promised in the filing to continue to pay.
"It was just a losing battle," Mr. Soapes said. "When I finally said enough's enough, I was getting 15 to 18 calls a day" from creditors. He said it was his second trip to bankruptcy court, the first coming in the 1990s when a business he owned went under. "I'm not even worried about my credit anymore," Mr. Soapes said. "I've got a house full of people that depend on me."
In all, some four million consumer bankruptcy filings have been recorded in the past three years. Surveys of debtors by the nonprofit Institute for Financial Literacy indicate that while most earn less than $30,000 and lack college degrees, a growing minority are middle-class families with incomes above $60,000 or college degrees.
Tim Zaneske, 44, who lost his job in June 2009 training civil engineers to use specialized software, filed for Chapter 13 bankruptcy in October 2009. He said he aimed to get rid of some debts so he could continue to pay the mortgage on his Flushing, Mich., home, though his house is worth less than the value of the mortgage loan.
Mr. Zaneske said his family now lived on his wife's income and his unemployment benefits to pay the bills and to keep up with the monthly payment to creditors specified in his bankruptcy agreement. Employers from out of state have contacted Mr. Zaneske to see if he would be willing to move, but between his mortgage and bankruptcy, it's not an option, he said.
"I'm really kind of tied to the state," he said. "I can't buy a house anywhere, because nobody's going to want to give me a mortgage."