In the federal government's fiscal year 2010, which ended September 30, more than 1.5 million non-business bankruptcy filings were processed, according to data released Monday by the Administrative Office of the U.S. Courts. That's up more than 14% from fiscal 2009, when about 1.3 million personal bankruptcies were filed.The facts show that in spite of lender sponsored legislation to make people debt slaves forever, 73% of bankruptcies were chapter 7.
"As the economy looks to climb out of the recent recession, businesses and consumers continue to file for bankruptcy to regain their financial footing," Samuel Gerdano, director of the American Bankruptcy Institute, said in a statement. The ABI is a non-partisan private research group.
Gerdano expects the number of bankruptcies to continue rising in the months ahead as unemployment holds near 10% and access to credit remains tight.
The number of non-business bankruptcies filed last year is the highest since fiscal year 2005, when over 1.7 million personal bankruptcies were filed. The spike in 2005 came just before Congress amended the bankruptcy code, making it harder for Americans to complete the process, which sparked a rush to file before the changes took effect.
The Bankruptcy Abuse Prevention and Consumer Protection Act of five years ago made it harder for individuals to receive Chapter 7 bankruptcy protection, in part by increasing the costs associated with filing. Chapter 7 is designed to give individual debtors a "fresh financial start" by liquidating assets and discharging debts.
In fiscal 2010, Chapter 7 filings spiked nearly 15% to over 1.1 million, from 989,227 in fiscal 2009.
Given there is no driver for jobs, and structurally high unemployment will be with us for as long as a decade, expect to see high rates of bankruptcies for a long time.
Please see see Common Sense vs. Academic Formulas; Fed Concludes Structurally High Unemployment is a Myth for a discussion of why the Fed is wrong when it concludes structural unemployment is "likely to be transitory rather than permanent".
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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