The number of Americans filing for bankruptcy rose 14% in the last year. More consumers declared bankruptcy in the 2010 fiscal year than in any year since 2005, when changes to federal bankruptcy law caused a spike in filings.
The numbers were released Monday by the Administrative Office of the U.S. Courts. They show that 1.5 million Americans requested bankruptcy protection in 2010, up from 1.3 million the year before.
Experts predict the number of bankruptcies in the U.S. to continue climbing, as lenders keep tight reins on credit unemployment remains around 10 percent.
“As the economy looks to climb out of the recent recession, businesses and consumers continue to file for bankruptcy to regain their financial footing,” Samuel J. Gerdano, director of the American Bankruptcy Institute, said in a press release.
More than 1.1 million people filed Chapter 7 bankruptcy, almost a 15% increase over 2009, according to the courts report. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 made it more difficult for consumers to get Chapter 7 protection, partly by increasing filing fees.
In Chapter 7, a consumers’ nonexempt assets are sold off to pay off creditors, whereas in Chapter 13 the consumer can obtain a repayment plan that may allow them to catch up on past-due payments and save their homes from foreclosure, according to a primer by the courts.
Image by Ryan Dickey, via Flickr.com.
Christopher Maag Contributing writer for Credit.com, Chris graduated with honors from the Columbia University Graduate School of Journalism, and has reported for a number of publications including The New York Times, TIME magazine and Popular Mechanics. Reach Chris via email at chris@credit.com.
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