Posted on Feb 25, 2011
The American Bankruptcy Institute (ABI) has reported that in 2010 filings for personal bankruptcy reached their highest level in five years and that they are expected to continue to rise this year.  These bankruptcies reached roughly 1.53 million for the 2010 calendar year and represent a 9% increase from 2009, when approximately 1.41 million consumer filings were recorded.  New Jersey had the 8th highest increase in filings (15.3%), exceeded by Hawaii (28.9%), California (25%), Utah (24.4%), Arizona (23.9%), Colorado (17.4%),  Wyoming (17.3%), and Florida (16.5%).

The Bankruptcy Code underwent a major revision on October 17, 2005, in a move by banks and the credit industry to make it harder for people to file bankruptcies (or at least harder to wipe them out in a chapter 7, rather than a chapter 13 repayment plan).  Despite this, says the ABI, chapter 13 bankruptcies represented only 30% of the filings last December.  ABI’s Executive Director Samuel J. Gerdano observed in a Jan. 3 statement that “The steady climb of consumer filings notwithstanding the 2005 bankruptcy law restrictions demonstrate the families continue to turn to bankruptcy as a result of high debt burdens and stagnant income growth.”

In 2005, bankruptcy filings reached tsunami level as people rushed to court prior to the changes taking effect.  This resulted in a dramatic drop in filings the following year.  However, this continued increase since the change would tend to indicate that the 2005 revisions may well not have had the effect intended.   The bad economic times are clearly contributing to it, so we will have to see how this trend reacts once we enter an economic recovery.

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Steven J. Richardson
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Bankruptcy, Collections, Student Loan, DUI and Traffic Court attorney in Woodbury, NJ.

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