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2010 Sees Nine Percent Jump in Filings For Bankruptcy

Many media outlets continue to report that the economy is heading toward recovery. Continued unemployment, decreased home values, high consumer debts loads and the foreclosure crisis also seem to make headlines. In 2010, individuals across Ohio and nationwide continued to seek a fresh start in chapter 7 bankruptcy and chapter 13 bankruptcy relief.

In 2005, Congress modified bankruptcy law in an effort to reduce filings. In 2010, 1.53 million Americans filed for bankruptcy, a nine percent increase over the number filing for relief in 2009, according to the American Bankruptcy Institute. The million and a half plus bankruptcy filings is the largest number since the law was amended.

Samuel J. Gerdano is the executive director of the ABI. He says the amendments to the bankruptcy code in 2005 "was supposed to reduce filings, but we are very close to the levels we were at then." Gerdano says "the laws of economic gravity are more powerful than the laws passed by Congress."

In the two years that preceded the bankruptcy law modification, many people filed due to uncertainty over what the 2005 law would provide. The 2005 law added a so-called "means test" in an effort to channel more filings into chapter 13 bankruptcy relief. Chapter 13 includes a payment plan that generally runs for three to five years and is available for working Americans. In 2010, roughly 30 percent of all consumer bankruptcy filings were chapter 13 cases.

Some experts, including Gerdano, believe that filings will continue to rise in 2011. Consumers continue to struggle with excess debt and stagnant income growth.

Source; International Business Times, "Personal bankruptcies spike 9 pct in 2010, rise expected in 2011," 5 Jan 2011

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