Personal Bankruptcy Filings Increase to Record Levels
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Technically, the recession may be over, but that doesn’t mean that individual financial problems are just going away. That’s not really how it works when it comes to personal finances. Instead, things are looking kind of desperate for some folks. The cumulative effects of a weak labor market and tighter credit (not to mention the things credit issuers have been doing that mean hardship for consumers) will be hard to shake off, and the latest data about bankruptcy filings bears this out.
Indeed, the American Bankruptcy Institute offers this report on the number of bankruptcy filings in October:
The 135,913 consumer bankruptcy filings in October represented a 27.9 percent increase over last October’s monthly total of 106,266, according to the American Bankruptcy Institute (ABI), relying on data from the National Bankruptcy Research Center (NBKRC). The October 2009 consumer filings represented an 8.9 percent increase from the September 2009 total of 124,790. Chapter 13 filings constituted 28.5 percent of all consumer cases in October, a slight increase from the September rate.
“The nearly 9 percent increase in consumer bankruptcy filings in October, together with a 7 percent jump reported in business cases, demonstrates the sustained stress on the U.S. economy,” said ABI Executive Director Samuel J. Gerdano. ABI forecasts that total bankruptcies this year will exceed 1.4 million, the highest number since 2005.
This is a new high, and likely represents the hard times that people have fallen upon. Traditionally, most bankruptcies are caused by medical bills and expenses. However, I’m wondering if this most recent rash of bankruptcies is more the product of job loss and an inability to keep up with everything due to economic conditions. And, of course, in some cases it might be a strategic decision to start all over, much like a strategic default.
Of course, the increase in bankruptcies should also serve as an important reminder to the rest of us: It is vital to prepare our personal finances ahead of time. Emergency funds, paying off debt and proper insurance can help. Although, in some cases, there are situations so devastating, or so long-term, that no amount of preparation can avert a financial catastrophe.
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