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Bankruptcy Filings Down In November

A recent report from the American Bankruptcy Institute says consumer bankruptcies fell to a nine month low last month. Filings in November dropped 13.3 percent from the rate seen in October. Overall however, the number of American consumers filing for bankruptcy relief remains high. Last month saw 2.2 percent higher bankruptcy cases than were filed in November 2009.

Chapter 13 filings comprised just less than a third of all consumer bankruptcy cases filed in November. In the month of November, 29.6 percent of bankruptcies were filed under chapter 13. Ohio bankruptcy lawyers note that chapter 13 allows an individual with regular income whose debts do not exceed specified levels to create reasonable repayment plan that generally lasts over the course of three to five years.

Some experts believe that lenders tightening of credit at the onset of the economic slowdown served to force many Americans into bankruptcy. As loans became more scarce consumers could no longer find new credit to pay down existing debts.

The job market also has a strong influence on bankruptcy filings. In 2009, 65 percent of consumers who had filed for bankruptcy said a reduced income caused them financial distress. According to the nonprofit Institute for Financial Literacy, 42 percent of 2009 bankruptcy filings rested upon job loss.

In 2006, 52 percent of individuals seeking bankruptcy protection cited a reduction of income as the source of their financial trouble, up from 36 percent in 2006. The 2006 numbers reflect filings occurring before the onset of the recession.

Source: The Wall Street Journal, "Personal Bankruptcy Filings Slowing but High," Sara Murray, 1 Dec 2010

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