Friday, December 4, 2009
Personal Bankruptcy Surges in US
Posted by: Christina Dove
Since the recession and financial crisis have been going on, people have been faced with tightened budgets, reduced salaries and have had to cut back spending a lot. Some people have been more affected than others and have had to file for foreclosures and file for personal bankruptcy. Although this trend has been going on for sometime now, bankruptcy has become more common as of late. The number of Americans filing personal bankruptcies surged 9% in October and were on target for the highest annual total in four years, according to a report issued Wednesday. This number also includes many businesses who have been forced to file for bankruptcy in these tough economic times. The group forecasts total bankruptcies to exceed 1.4 million in 2009, which would be the highest since 2005. It would also be an increase of at least 30% from last year. The explanation for this sudden increase is that people may have been able to survive the tough times when they first hit but now are beginning to run out of funds and forced to file for bankruptcy as their only viable option.
By filing for bankruptcy, people are able to relieve all of their current debt obligations to creditors. Although this seems like a great idea to start over new, the bankruptcy can stay on your credit report for 7 years and can make it very challenging to get approved for credit or a loan. One source estimates that the reform caused about 800,000 additional mortgage defaults and 250,000 additional foreclosures to occur in each of the past several years. Hopefully people will be able to get their feet back on the ground before having to resort to the last option of filing for bankruptcy.