Bankruptcy filings up 33 percent in 2008
Filings on track to reach pre-2005 levels
By Connie Prater | Published: January 5, 2009
U.S. consumer bankruptcy filings topped 1 million in 2008 -- a nearly 33 percent increase from 2007 and the first time bankruptcies reached the million mark since 2005 reform measures took effect. The recession and credit crunch are expected to drive the filings even higher in 2009.
Figures released by the American Bankruptcy Institute and compiled by the National Bankruptcy Research Center show 1,064,927 consumer bankruptcy filings between Jan. 1 and Dec. 31, 2008. That is up from only 801,840 consumer filings in 2007.
"Consumers are under great financial stress, with no immediate end in sight," Sam Gerdano, ABI executive director, said in a press release. "We expect the upward spike in personal bankruptcies to continue in 2009."
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 made it more difficult and costly for consumers to file for bankruptcy. In 2005, nearly 2 million bankruptcy petitions were logged as debtors raced to beat the deadline to file before the tougher measures took effect. In 2006, the first full year after the new law's enactment, bankruptcies dipped to just 617,000 cases, according to filing data compiled by the Administrative Office of the U.S. Courts. The 2007 figures were 38 percent higher -- at more than 850,000 total filings. Some bankruptcy experts predict the 2009 filings may top levels seen before 2005.
Consumer advocates say the effect of the 2005 law has been more consumers remaining in financial distress longer.
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