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Personal bankruptcies are up. Jersey Housewife Teresa Giudice notwithstanding, the numbers of average Americans filing for bankruptcy in our wobbly economy is at its highest level since 2005, according to a report by Administrative Office of the U.S. Courts. For the year ending June 30, there were 1.57 million bankruptcies, up 20 percent from the year before.
This increase in bankruptcy filings brings up several questions. First, why are the numbers measured against so recent a date as 2005? It was in that year that the law changed to make personal and business bankruptcy more difficult to file for. The second question is of course, if we are in recovery, why are the filing numbers still going up?
According to experts who talked to Reuters, the answer to the increase in bankruptcy contains a combination of factors. Deborah Thorne is an associate professor of sociology at Ohio University and has written articles with Elizabeth Warren, the Harvard Professor who is a candidate to head the new federal Consumer Financial Protection Bureau. Thorne believes the increase in bankruptcy is due to the continued weak job market, expensive health care, with an assist from the still on-going foreclosure crisis. "It feels very unsettled, and I'm not surprised the numbers are going up. Until we get our feet on the ground, provide decent-paying jobs, and do something with the housing crisis, bankruptcies will continue to go up," Thorne told Reuters.
Despite the high numbers, bankruptcy is a difficult decision for most people. Bankruptcy is a federal court process designed to help consumers and businesses eliminate their debts or repay them under the protection of the bankruptcy court. There are some things bankruptcy can do and some it cannot. Bankruptcy can help wipe out credit card debt and other types of unsecured debt, stop collection harassment and eliminate some types of liens. Filing for bankruptcy however, will not usually eliminate debts like child support, alimony, most tax debts, student loans, and secured debts.
If you are facing serious debt problems, bankruptcy may offer a powerful remedy. However you should consider alternatives like negotiating with creditors carefully before you act, and consult a bankruptcy attorney if you can.