Bankruptcy Filings on the Rise
Data from the U.S. Bankruptcy courts released recently showed that there were almost one million individuals and businesses seeking bankruptcy protections as an option to relieve their debt in the 12-month period ending June 30.
There were 967,831 bankruptcy cases filed since July 1, 2007, up 28.9% from the prior 12 months, when cases totaled 751,056. Individual filings accounted for 96.5% of the yearly total or 934,009. Of those, 592,376 filed for Chapter 7 bankruptcy, which involves liquidation of non-protected assets, and 340,852 filed for Chapter 13 Bankruptcy protection, which allows individuals to reorganize and pay down their debts, and in the process keep their home and other possessions. An additional 780 individuals filed for Chapter 11, which is normally used for businesses but can apply to individuals who are reorganizing but have more debt than allowed under Chapter 13.
Quarterly numbers also spiked in the three months that ended June 30 to the highest level since late 2006. Individual filings accounted for 96.5% of the 276,510 quarterly filings.
Tennessee ranked first in the number of bankruptcies per capita in the 12 month period. Almost seven of every 1,000 people in the state sought bankruptcy protections. Georgia was second with 5.7 per 1,000 residents. Alabama, Nevada, Indiana, Michigan, Ohio, Kentucky, Arkansas and Mississippi rounded out the top 10 in per capita filings.
The largest percentage increase, 60.9%, was in the court system's ninth circuit, which includes California, Arizona and Nevada, states where housing prices have plummeted since the bubble burst in the housing market. Courts in the seventh and eleventh circuits, which include Illinois, Indiana and Wisconsin and Alabama, Florida and Georgia respectively, both saw over 30% increases in the number of filings.
By region, the highest number of combined filings was in the U.S. Bankruptcy Court's 6th District, which encompasses Kentucky, Michigan, Ohio and Tennessee. The total came to 167,561, up 21.2% in the last year.
Filings also spiked to 276,510 in the three months ended June 30 to the highest level of any quarter in 2008. Of those, 266,767, or 96.5%, were individual filings, and 9,743, or 3.5%, were business filings. It is also the highest number of quarterly filings since the first quarter of fiscal year 2006 when bankruptcy filings surged between October 1, 2005 and December 31, 2005, following implementation of the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act.