Bankruptcy filings volume in US is still soaring despite economic recovery signs

As American Bankruptcy Institute data showed, despite good signs of economic recovery consumer bankruptcy filings surged this month compared to a year earlier figures.

Thus the data reflected 14% surge on an year basis. As for the monthly changes, 9% increase from January is represented by 111,693 cases filed last month.

And that financial distress is driving more Americans to file for Chapter 7 bankruptcy, which allows a court to discharge most unsecured consumer debt, including credit card bills.

When a stricter bankruptcy law took effect in 2005, a main target was to require more families to rely on Chapter 13 bankruptcy, which requires filers with regular income to repay debts in full, or in part, over several years. Yet the number of Chapter 13 filings decreased 3% last month from January.

Since the law was changed in 2005, the bankruptcy rate has been increasing every year.

Moreover, business bankruptcy filings are also increasing. Therefore, in February, there were 6,557 business filings, compared to 6,390 a year earlier, according to Automated Access to Court Electronic Records digits.

American Bankruptcy Institute representative expect this trend to continue. However, business bankruptcies represent fewer than 10% of total bankruptcy filings.

As for the last year, there were 1.47 million bankruptcy filings, up 32% from the previous year, as reflected data from the Administrative Office of the US Courts released Tuesday. Chapter 7 filings surged by 41% in 2009, while Chapter 13 filings rose by just 12%.