Personal bankruptcies hits a 4-year high
Mounting unemployment and housing crisis push the filings to the highest level since 2005.
By Hibah Yousuf, CNNMoney.com contributing writer
October 2, 2009
Many big companies have managed to emerge from Chapter 11, but it’s a lot harder to bounce back from a second bust…or a third.
NEW YORK (CNNMoney.com) — Personal bankruptcies topped the 1 million mark in the first nine months of the year, the first time it has done so in four years, according to an industry research firm released Friday.
The personal bankruptcies were up 35% from the same period in 2008, according to the report from the American Bankruptcy Institute (ABI).
“Bankruptcy filings continue to climb as consumers look to shelter themselves from the effects of rising unemployment rates and housing debt,” said ABI executive director Samuel Gerdano.
The recession triggered more individuals earning $40,000 or more per year and those with associate or bachelor degrees to file for bankruptcy in 2008 than in years past, according to the annual Consumer Bankruptcy Demographic Report released by the Institute for Financial Literacy in June, and the organization expects the trend to continue.
“The folks going into bankruptcy are reflective of the middle class debtor,” said Leslie Linfield, executive director of the Institute for Financial Literacy. “The biggest problem is that people are over extended on their credit. It’s been the perfect storm of credit card debt and mortgage debt leading to delinquencies.”
While only 37.6% of consumers who filed for bankruptcy in 2008 attributed job loss, Linfield expects that number to rise significantly for 2009. “At the end of last year, unemployment hadn’t crept up as high as it is now,” Linfield said.
Unemployment, which climbed from 7.2% in December 2008 to 9.8% in September 2009, will continue to push consumer bankruptcies higher until they peak in late 2010 or 2011 before leveling off, said Linfield.
There were 1,046,449 consumer bankruptcies in the first nine months of this year. It was the highest nine-month figure since 2005, when consumers filed 1,350,360 bankruptcies in the first three quarters of the year, according to ABI, which uses data from the National Bankruptcy Research Center.
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