Home > 2011 > Managing Debt > Consumer Bankruptcies Up Nine Percent In 2010

Consumer Bankruptcies Up Nine Percent In 2010

Advertiser Disclosure Comments 0 Comments

More and more U.S. consumers, buffeted by heavy economic winds, are crying “uncle” and doing the once unthinkable – declaring bankruptcy.

According to the American Bankruptcy Institute, citing data from the National Bankruptcy Center, U.S. consumer bankruptcies shot up by 9% in 2010 – the highest rate since 2005.

Don’t expect the news to get any better this year.The steady climb of consumer filings notwithstanding the 2005 bankruptcy law restrictions demonstrate that families continue to turn to bankruptcy as a result of high debt burdens and stagnant income growth,” said ABI Executive Director Samuel J. Gerdano. “We expect that consumer filings will continue to rise in 2011.”

[Related: Bankruptcy Survival Guide]

The National Bankruptcy Center data was accumulated by Prof. Ronald Mann, from the University of Columbia Law School, and released on January 4, 2011.

He estimates that about one out of every 150 U.S. adults has entered into bankruptcy. Mann also says that the bottom half of the country is taking the biggest financial beating, bankruptcy-wise.

“Through the course of 2010, the filing rates have become increasingly disparate throughout the country, Mann writes in his report.”The highest filing rates are concentrated in the Southwest (Nevada heads the list), and a swathe cutting up from the Southeast.”

Georgia and Tennessee rank second and third in state bankruptcies.

Why the spur in bankruptcies rates? Mann and the ABI point to the 2005 bankruptcy law that made it tougher for consumers to walk away from their debts. That law, coupled with the recent recession, which made it harder for Americans to find jobs and credit, has helped drive bankruptcy rates upward.

[Infographic: One Bankruptcy Every 15 Seconds]

Gerdano says that Americans are trying to cut their personal debt levels, but with mixed success. Increasingly, that 2005 bankruptcy law has worked against consumers who try to rise above bankruptcy.

“The (2005) law was supposed to reduce filings, but we are very close to levels we were at then,” Gerdano said. “The laws of economic gravity are more powerful than the laws passed by Congress.”

To consumers who’ve thrown in the towel, those are hardly comforting words.

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Certain credit cards and other financial products mentioned in this and other articles on Credit.com News & Advice may also be offered through Credit.com product pages, and Credit.com will be compensated if our users apply for and ultimately sign up for any of these cards or products. However, this relationship does not result in any preferential editorial treatment.