A recent decline in bankruptcy filings may indicate the U.S. economy is steadily emerging from the current recession.
According to the American Bankruptcy Institute (ABI), the number of personal bankruptcy filings in November was substantially lower than in October.
In November, there were a total of 114,587 bankruptcies filed in the United States, a 13.3 percent decrease from consumer filings in October. While the number of individuals filing for bankruptcy in November decreased from the previous month, the number increased by 2.2% compared to November 2009.
""The drop in consumer filings from October is possibly a sign that the deleveraging of U.S. consumers has begun, after years of rising consumer debt,"" said Samuel J. Gerdan, executive director of the ABI. Still, we anticipate that there will be close to 1.6 million consumer bankruptcies by the end of the year.
Individual bankruptcy petitions increased by 12 percent during the first nine months of 2010 compared to the same period in 2009. Chapter 7 and chapter 13 are the most prevalent forms of consumer bankruptcy.
Typically, Chapter 7 bankruptcy eliminates expenses like credit card and medical debt. Filers must still satisfy debts such as child support, student loans, and taxes, as well as the majority of liens, which frequently include auto loans and mortgages. Although there is no debt limit for chapter 7 filings, eligibility is typically restricted to those with incomes below the state median. In addition, petitioners are required to surrender any qualified assets exceeding a certain value. The proceeds from the sale of these assets are distributed to the creditors.
Those who qualify for Chapter 13 bankruptcy can usually repay a portion of their debt. Based on a person's monthly disposable income, Chapter 13 filers typically engage into a three- or five-year repayment plan. Generally, filers are permitted to retain any remaining assets once the payment plan has been satisfied. Debts not included in the payment plan need not be repaid. By making delinquent mortgage payments over a set period of time, individuals filing for Chapter 13 bankruptcy can typically keep their residences from going into foreclosure.
The advantage of bankruptcy is that it affords individuals some financial respite. However, it persists on a person's credit report for up to ten years, making it difficult to qualify for credit.
In 2005, amendments were made to the bankruptcy code to make filing more difficult. However, the ABA reports that the number of individual bankruptcies continues to rise. Since 2006, the total number of U.S. bankruptcy filings has increased by 12 percent.
Consult a local bankruptcy attorney for a better understanding of your options if you are considering declaring bankruptcy.
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