Bankruptcy Cases Up at the End of 2009

January 4th, 2010 • Related • Filed Under • by tisha

While most people felt at least some impact of the recession, reports show that there was a significant increase in bankruptcy filings for both businesses and individuals at the end of 2009. Nearly 1.3 million people filed for protection which is a 32% increase from the first eleven months of the previous year.

The National Bankruptcy Research Center conducted the study that does not include the month of December 2009 in the statistics. The group’s study shows that 2009 filings has surpassed the year-to-date totals for all previous years since the bankruptcy reform bill in 2005. The statistics also show that there was a dramatic increase in Chapter 7 filings, which went up 42% since the previous year. Joint filings also increased to 36%, presumably because many households are seeking protection and relief at all levels. Chapter 13 filings also went up but by a smaller margin at 12%.

The state with the highest filing rates was Nevada where filings were 2.5 times the national average. Nevada was followed by Tennessee, Georgia, Alabama, and Indiana, all of which had rates 1.5 or more times the national average. The statistics show that more than one of every six bankruptcy filed in 2009 happened in one of those states. The state with the lowest bankruptcy filing rate in 2009 was Alaska. Other states will less than half the national average filings were District of Columbia, North and South Dakota, and South Carolina. Arizona was the state with the largest increase in bankruptcy filings. There was a significant 80% rise in filings from the previous year. California, Wyoming, and Utah also had dramatic increases in filings at 60%. States with the lowest filing increases were Nebraska, Pennsylvania, Alaska, Tennessee, and South Carolina.

The findings were especially interesting because the 2005 bankruptcy reform bill had Congress pushing for more Chapter 13 bankruptcies than Chapter 7. Nationally, only 28% of the filings were Chapter 13 and most of those were done to protect homeowners that were experiencing mortgage payment problems. The states with the highest percentage of Chapter 13 filings were mostly in the South with Louisiana, Alabama, South Carolina, and Tennessee leading the numbers. New Mexico, Iowa, and West Virginia have the least amount of Chapter 13 filings.

Critics of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 perceive that Congress’s revisions were not very effective and statistics may show this to be true. The measure was taken to change the bankruptcy laws, essentially to make it more difficult for consumers and businesses to file for bankruptcy protection.