Posted Dec 16, 2008 12:37 pm CST
Business bankruptcies jumped 49 percent in fiscal 2008, while consumer filings increased 30 percent.
Overall, bankruptcies increased 34 percent, the New York Times reports. Most of the filings were for Chapter 7 liquidations.
Brooklyn bankruptcy lawyer Jay Fleischman told the Times that creditors are suing more quickly for collection, and it’s not just those on the lower economic rungs who are responding with a bankruptcy filing.
“Our clients now tend to be people who had better-paying jobs,” he told the Times. “More of the middle class and upper-middle class is being forced to consider this option as a result of job losses and the erosion of home values.”
For the 12-month period ending Sept. 30, business filings totaled 38,651, compared to 25,925 business filings for fiscal 2007, according to a press release. Nonbusiness filings totaled 1,004,342, compared to 775,344 the year before.
The numbers are still well below the amount of bankruptcy filings before passage of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, reports The BLT: The Blog of Legal Times. The law had required debtors to satisfy a means test before filing for Chapter 7 bankruptcy, spurring a big drop in filings in 2006.
Sam Gerdano, executive director of the American Bankruptcy Institute, told the BLT that he expects the rate of filings to accelerate since filings often lag economic troubles. Tracking bankruptcy is like watching the economy through a “rear view mirror,” he said.
Michael Richman, chair of the bankruptcy group at Foley & Lardner, told the Times that many bankruptcy lawyers expect to see “a literal wave of new Chapter 11 cases” after the holidays.