Bankruptcy Filings Approach 5-Year High

With unemployment rates nearing double digits and the economy still in a slump, bankruptcy filings are at their highest since 2005, according to government data published this week.

The U.S. Courts' Administrative Office revealed that from April to June this year, 422,061 bankruptcies were filed, a rise of 9% over the year. Only 388,148 bankruptcies were filed in the same period in 2009, and only 381,073 the year before.

Over 1.5 million bankruptcy filings were started in the year ending June 30, a good 20% higher than the previous year’s 1.31 million. Most of them were consumer bankruptcies, which went up 21%, while corporate bankruptcies rose 9%.

This quarter is the first to see more than 400,000 filings since October to December 2005, when 667,431 bankruptcies were initiated. This was when Congress implemented key changes in bankruptcy laws that increased filing time for both individuals and businesses.

Ohio University professor Deborah Thorne says the main causes of bankruptcy have always been health care and job loss, and combined with the foreclosure crisis, the figures aren’t that surprising. She added that bankruptcies will continue to rise unless jobs are provided and the housing crisis is resolved.

The national unemployment rate reached 9.5% last July. According to the U.S. Federal Reserve, this rate, alongside low income growth, home price drops, and tight lending policies have largely hampered economic recovery.

As of last year, Nevada has the highest bankruptcy rate in the country, with 11.74 bankruptcies filed per 1,000 people. Alaska, with only 1.58 filings per 1,000, had the lowest rate.

 

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