Bankruptcies could exceed 1.1m by 2009

10.24.08
By Lewis Green

By the end of the year, the number of personal bankruptcies filed during 2008 could be greater than 1.1 million, the executive director of the American Bankruptcy Institute has told the Los Angeles Times.

To put it in perspective, that figure is 277,410 higher than the total number filed last year. In other words - the number of people facing significant financial challenges is rising.

Experts have identified the most common causes of bankruptcy as unemployment, divorce, unexpected costs such as medical bills and overextended credit.

In the midst of an economic downturn such as the one currently being experienced, any or all of these factors could prompt someone to make the very serious decision to file for bankruptcy.

"The continued rise in personal bankruptcies reflects high consumer debt, made worse by energy costs and the weak housing market, trapping many households in homes they can neither afford nor sell," Samuel Gerdano of the ABI told the news provider.

You may be thinking: that sounds familiar. However, it is a mistake to look at bankruptcy as an easy solution to credit problems.

In fact, the decision may end up creating as many new difficulties as it solves. For one thing, bankruptcies remain on your credit report for an entire decade.

Yes, that means that credit card companies, mortgage providers and anyone else who has access to your credit report over the next ten years will see that you filed for bankruptcy. That could make it extremely difficult to obtain a line of credit.

The bottom line is that the economy is certainly difficult at the moment and your finances may be suffering. But before you opt for the last resort, make sure there are not other solutions you may have overlooked.

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Personal bankruptcies are on the rise