August consumer bankruptcies up 24%
From the American Bankruptcy Institute:
The 119,874 consumer bankruptcy filings in August represented a 24 percent increase over last year’s monthly total….Although an increase over the previous year, the August 2009 consumer filings represented a 5 percent decrease from the July 2009 total of 126,434. Chapter 13 filings constituted 28.3 percent of all consumer cases in August, unchanged from the July rate.
“Consumers continue to turn to bankruptcy as a shield from the sustained financial pressures of today’s economy,” said ABI Executive Director Samuel J. Gerdano. “As a result, we expect consumer filings to top 1.4 million this year.”
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As you can see, bankruptcies were highest in October 2005, when the new bankrutcy law took effect. The total that month surpassed 600k.
Among other things, that law mandated credit counseling and established a means test for Chapter 7 filings. Chapter 7 bankruptcy allows filers to wipe out their debts. Chapter 13 doesn’t extinguish debt; it puts you on a payment plan.
By the way, when economists talk about “pulling demand forward,” this is the kind of dynamic they have in mind. What Cash4Clunkers did to demand for cars, what the first-time homebuyer credit is doing for home sales, the Oct ’05 law did to demand for bankruptcy filings — to a much greater degree.
More recently, bankruptcies have flat-lined around 120k per month. I suspect they will trend higher over the next few years as lower home values make it difficult/impossible to refinance debts using home equity. Obviously higher unemployment won’t help either…