Bankruptcies surge in 2008, passing 1 million mark again

By CreditCards.com staff

Personal bankruptcies surged to more than 1 million filings in the United States in 2008 -- the most since a rewrite of bankruptcy laws took effect in 2005.

Filings of Chapter 7 and Chapter 13 bankruptcies rose 33 percent in 2008 as the economy worsened, according to data from U.S. bankruptcy courts and compiled by the bankruptcy data firm Aacer. Chapter 13 bankruptcy allows people to pay off debts under a three- to five-year plan; Chapter 7 bankruptcy allows for a discharge of all debt.

In 2007, there were 819,115 such filings in the 50 states and Washington, D.C. The number rose to 1,086,130 in 2008 as the recession took hold. That's nowhere near the record of 2.1 million filings in 2005, as consumers rushed to file before a federal bankruptcy reform law went into effect and made filings more difficult and expensive, but it's still a significant leap.

The pain of bankruptcy was spread unevenly, but it was everywhere. Not one jurisdiction showed a decrease in filings, whether measured on a per capita basis or by the raw numbers of filings.

Texas came closest -- there were only about 1,500 more Chapter 7 and Chapter 13 filings in 2008 than the year before.

At the other end of the scale were five states where the bad economy plus housing woes hit particularly hard. The greatest increases in per capita bankruptcy filings were found in Nevada (7.15 filings per 1,000 residents), Delaware (4.02), California (3.57), Florida (3.63) and Rhode Island (3.99).

For the second straight year, Tennessee had the distinction of having the overall highest per capita rate of filings, with 7.65 filings per 1,000 residents. Alaska retained its title as the land of the fewest personal bankruptcies -- only 877 were filed all year. That works out to a rate of 1.28 per 1,000.

Chapter 11 bankruptcies, under which businesses file for court-supervised reorganization or liquidation, also soared. A total of 10,084 companies filed Chapter 11 in 2008. That represents an increase of 62 percent, and is more than double the number of such filings in 2006.

See related: Bankruptcy data state by state

Published: January 23, 2009

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