WSJ: Bankruptcy Filings Leapt 9% Last Year

Discussion in 'Bankruptcy' started by sufaud, Jan 4, 2011.

  1. sufaud

    sufaud Guest

    The Wall Street Journal
    MONEY
    January 4, 2011

    Bankruptcy Filings Leapt 9% Last Year

    By SARA MURRAY

    The number of Americans filing for personal bankruptcy topped 1.5
    million last year, as high long-term jobless rates and depressed home
    prices drove more households to seek court protection.

    Personal bankruptcies rose to 1.53 million, up 9% from 2009, the
    highest level since a revamp of the law took effect in 2005, according
    to the American Bankruptcy Institute, an association of attorneys and
    other bankruptcy professionals, and the National Bankruptcy Research
    Center.

    A handful of Southwestern states accounted for much of the uptick in
    filings by households buckling under debt. "There are two groups of
    people who have had really high filings during the [financial] crisis—
    the Pacific Southwest and the Southeast," said Ronald Mann, a Columbia
    University law professor.

    Conditions have improved in the Southeast, with filings dropping last
    year in Tennessee, South Carolina and Alabama. But the Southwest
    continues to struggle. In California, bankruptcies were up 25% from a
    year earlier. In Arizona, they rose nearly 24%.

    Ed Soapes, 53 years old, of Corona, Calif., filed for bankruptcy
    protection in September 2010, after losing his job as an estimator for
    a construction company in February. He said he now relied on his and a
    daughter's disability benefits to pay the bills in a household that
    also includes two other children--one in college, one unemployed--and
    his mother. Mr. Soapes's filing listed more than $150,000 in debts,
    including a mortgage that he promised in the filing to continue to
    pay.

    "It was just a losing battle," Mr. Soapes said. "When I finally said
    enough's enough, I was getting 15 to 18 calls a day" from creditors.
    He said it was his second trip to bankruptcy court, the first coming
    in the 1990s when a business he owned went under. "I'm not even
    worried about my credit anymore," Mr. Soapes said. "I've got a house
    full of people that depend on me."

    This year could bring a decline in bankruptcies, as the economy
    improves and consumers borrow less. "Over the course of the year, I
    think bankruptcies will be going down," said Robert Lawless, a
    University of Illinois law professor. "The reason for that is
    borrowing's down…there's less of a reason for people to take the legal
    step of filing for bankruptcy."

    The 2005 revision of the bankruptcy statute was designed to make it
    more difficult for consumers to shed their debts. It aimed to steer
    more debtors into Chapter 13, where debtors work out a repayment plan,
    instead of Chapter 7, where filers forfeit their assets and their
    debts are forgiven. But only about a third of debtors file under
    Chapter 13.

    The bankruptcy law was passed prior to the housing slump and deep
    recession that pushed unemployment to nearly 10%. Combined with
    tightened access to consumer credit, which tends to spur a rise in
    bankruptcies, the downturn has pushed filings to levels higher than
    backers of the law anticipated.

    In all, some four million consumer bankruptcy filings have been
    recorded in the past three years. Surveys of debtors by the nonprofit
    Institute for Financial Literacy indicate that while most earn less
    than $30,000 and lack college degrees, a growing minority are middle-
    class families with incomes above $60,000 or college degrees.

    Tim Zaneske, 44, who lost his job in June 2009 training civil
    engineers to use specialized software, filed for Chapter 13 bankruptcy
    in October 2009. He said he aimed to get rid of some debts so he could
    continue to pay the mortgage on his Flushing, Mich., home, though his
    house is worth less than the value of the mortgage loan.

    Mr. Zaneske said his family now lived on his wife's income and his
    unemployment benefits to pay the bills and to keep up with the monthly
    payment to creditors specified in his bankruptcy agreement. Employers
    from out of state have contacted Mr. Zaneske to see if he would be
    willing to move, but between his mortgage and bankruptcy, it's not an
    option, he said.

    "I'm really kind of tied to the state," he said. "I can't buy a house
    anywhere, because nobody's going to want to give me a mortgage."

    http://online.wsj.com/article/SB10001424052748704111504576060181631140482.html
     
    sufaud, Jan 4, 2011
    #1
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