Bankruptcy Filings Up 38 Percent, With Big Boost in Chapter 7
The troubled economy is reflected in new figures that show bankruptcy filings rose last year by 38 percent. The totals show consumers aren’t as shy about seeking Chapter 7 liquidations, despite new filing requirements that took effect in 2006.
The number of filings rose to 850,912 in 2007, according to a press release by the Administrative Office of the U.S. courts. Most of the cases involved predominantly nonbusiness debts. The numbers have seesawed since 2005, when debtors were rushing to beat the filing requirements.
Bankruptcy filings were at an all-time high of more than 2 million that year. The number dropped in 2006 to only 617,660.
A 2005 law required debtors to satisfy a means test before filing for Chapter 7 bankruptcy, which permits liquidation of debts. That resulted in a huge drop in the number of Chapter 7 filings, from more than 1.6 million in 2006 to only 360,890 in 2006.
But in 2007, the number of Chapter 7 filings increased to 519,364, a 44 percent hike over the prior year. Chapter 13 filings, which allow consumers to keep their homes, were also up by 29 percent.
Part of the increase in Chapter 13 filings may have been fed by lawyers contacting debtors whose homes were already in foreclosure, ABAJournal.com noted in an October post reporting on preliminary figures.
