November bankruptcy filings by consumers were considerably down compared to last month. However, filings for the year are higher than those filed in 2009 thus far. This article details some bankruptcy statistics for 2010 and provides a summary of information on Chapter 7 and Chapter 13 bankruptcy.
A recent drop in bankruptcy claims might be an indicator the U.S. economy is slowly starting to crawl out of its current recession.
Individual bankruptcy filings for November were significantly lower than the previous month, according to the American Bankruptcy Institute (ABI).
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U.S. bankruptcy filings totaled 114,587 during November, a 13.3 percent drop from October consumer filings. While individuals filing bankruptcy in November saw a decline from the previous month, the number of filings actually rose by 2.2 percent compared to November 2009.
"The drop in consumer filings from October is perhaps a positive step that the deleveraging of the U.S. consumer may be underway, after years of expanding consumer debt," ABI Executive Director Samuel J. Gerdano said. "Still, we anticipate that there will be nearly 1.6 million consumer bankruptcy filings by year end."
Bankruptcy filings by individuals during the first nine months of 2010 increased by 12 percent compared to the same period last year. The most common types of bankruptcy filed by consumers are chapter 7 and chapter 13.
Chapter 7 bankruptcy typically removes expenses such as credit card and medical debt. Filers are still required however to satisfy debts such as child support, student loans and taxes, as well as most liens, which often include car loans and mortgages. While there is no debt threshold for chapter 7 filings, eligibility is typically limited to individuals whose income is below the state median. Additionally, filers are required to relinquish any qualified assets worth over a certain amount. Profits from the sale of these assets are given to creditors.
Those eligible for Chapter 13 bankruptcy are typically able to pay back some portion of their debt. Chapter 13 filers typically enter into a three or five year repayment plan based on an individual's monthly disposable income. Filers are usually allowed to keep any remaining assets in their control once the payment plan is satisfied. Debts not part of the payment plan are not required to be repaid. Individuals filing for Chapter 13 bankruptcy can generally prevent their homes from entering foreclosure by paying delinquent mortgage payments over a set period of time.
The benefit of bankruptcy is that it provides individuals with some degree of financial relief. However, it remains on an individual's financial record for as many as 10 years, making it hard to qualify for credit.
Changes were made to the bankruptcy code in 2005 with the intention of making it harder to file. However, the ABA reports the number of bankruptcies filed by individuals continues to increase. As a whole, U.S. bankruptcy filings have risen by 12 percent since 2006.
If you're considering filing for bankruptcy, consult one of the bankruptcy lawyers in your area for a better understanding of your options.
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