WASHINGTON (AP) – Bankruptcy filings rose by 66 percent nationwide in the first quarter, according to government data that analysts say are partly a reflection of the fallout from the housing market slump and rising household debt.
Filings for the three months ended March 31 rose to 193,641, according to statistics released Wednesday by the Administrative Office of the U.S. Courts. Business filings rose nearly 54 percent to 6,280, while personal cases surged more than 66 percent to 187,361.
In the 12 months ended March 31, the number of bankruptcy filings dropped by more than 61 percent to 695,575, though the data were skewed by a change in the law. Filings in the year-ago period were unusually high because of the pending Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, which went into effect in October and made filings more difficult and expensive.
The full-year statistics ‘still capture the distortion effects’ of the reform, said Sam Gerdano, executive director of the Alexandria, Va.-based American Bankruptcy Institute.
Still, Gerdano expects monthly filings to remain about 50 percent higher than a year ago for the remainder of 2007. Rising mortgage defaults and foreclosures, as well as higher overall debt burdens on households, make it ‘inevitable that there is going to be an increase in the numbers … people looking to bankruptcy as a way out of their financial problems,’ Gerdano said.
Consumer groups in April called on Congress to reform bankruptcy laws that give mortgage lenders a higher priority than most other creditors and make it easier for families hurt by the cool housing market to file for bankruptcy and keep their homes.
For the year ending in March, business filings dropped nearly 38 percent to 21,960, while personal filings fell almost 62 percent to 673,615, according to the federal courts data.
Filings under Chapters 7, 11, and 13 all fell, while only Chapter 12 filings rose slightly to 372 from 366 in the year-ago period. Chapter 12 is an extension of Chapter 11, which protects companies from creditors’ lawsuits while reorganizing, and applies to family farms.
Proponents of the legislative change can say that despite a quarterly increase, filings are well below the levels of the decade leading up to it, while critics will note that more people with financial vulnerability ‘need bankruptcy as a safety valve,’ Gerdano said.
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Bankruptcy filings rise in 1Q
