Increase in Personal Bankruptcy

Written by Stefanie Marty

Personal bankruptcy filings in the United States have risen dramatically in 2009. Here are some numbers: In September alone 130,000 families filed for bankruptcy and so far this year more than one million people have done so. This is a huge increase from 2008 when the total number of bankruptcy filings was 1.1 million. And compared to the first nine month in 2008, there has been a 40% increase in the same timeframe of 2009.

A report of Equifax showed that together with this rise of bankruptcy filings, mortgage delinquencies raised as well, while credit card debt and lines of credit are being reduced. Dann Adams, president of Equifax’s U.S. Consumer Information, explains this result with the current economy in transition. He said that many consumers are still struggling with the high unemployment and the restricted credits, but have improved their cash management.

Other reasons for the high increase in personal bankruptcy filings are the high debt-level people carry, the medical problems people face and the way the real estate market has developed. The debt US citizens hold relative to their income is too big for that they would be able to pay the debt back in case of a job loss. Today, the debt to income ratio of Americans is bigger than 130%. Further many people face high medical costs which make them take on high levels of debt. A statistic says that between 30% and 50% of bankruptcy cases involve medical debt. Lastly, the assets people held – especially the real estate- have lost their value over the last year, what makes people owe even more.

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