Why Are Bankruptcy Filings Increasing?


According to a recent study put out on USCourts.gov, bankruptcies are up by 20% as of the 12 month period ending in June. This came out in late August of 2010 and some of the statistics are quite startling. In a related article on Bankruptcy Law Network, the statistics delve even deeper into the problem. With over 1,500,000 people filing bankruptcy in this period, it's pointed out that means someone is filing bankruptcy every 20 seconds. And since many file jointly - as couples and as families - that may mean every 15 seconds someone is filing bankruptcy. These numbers are quite startling.

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A great majority of consumers are choosing Chapter 7 over the other personal bankruptcy form Chapter 13. Over 1.1 million people filed Chapter 7, up over 200,000 from 2009. About 400,000 individuals filed Chapter 13, up only about 50,000 since 2009.

Because of joint bankruptcy filings, a good ballpark number given on the Bankruptcy Lawyer Network is about 2 million people having filed bankruptcy in the 12 month period ending in June 2010.

Why are so many bankruptcies occurring? First and foremost is the fact that that many are unemployed, many have immense credit card debt, too many are without medical coverage, and perhaps worst of all foreclosures are occurring across the country in a surprising numbers. Because of the mortgage crisis, foreclosures are so common that in some states, such as Florida, 1 in 200 homes are foreclosed upon every month.

Medical coverage has been the prime factor in filing for Chapter 7 bankruptcy, as many who are unemployed and without benefits are charged scary fees when they have to go to a hospital. Since almost 10% of workers are unemployed, and the fact that many jobs are being sent out of country, there isn't enough capital in the economy. Because people are not spending, businesses are going bankruptcy. Because businesses are going bankruptcy, there are less jobs. Because many are without jobs, they lack proper coverage and cannot keep up with mortgage payments. This is all a cycle.

Can anything be done? Yes, the government, republicans and democrats and independents, are taking action. Whether this is enough is cause for debate. But state unemployment payments are still in use, keeping many afloat. Some are succeeding even with our crisis. And perhaps with a new focus on getting medical coverage, in investing in new small businesses and expanding corporations, there can be change.

Should you file bankruptcy? Just because so many are filing does not mean it's always used correctly. However, bankruptcy, like any tool, is an option on the table.


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