The latest numbers on bankruptcy filings in 2010 have been released, and 1.53 million Americans filed for bankruptcy protection last year, an increase of 9% over 2009’s figures. This number is the highest number of bankruptcy filings since the passage of the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) became law in 2005. In that year, 2 million Americans filed bankruptcy in order to file before BAPCPA’s restrictions on bankruptcy filings took effect.
While the 9% increase was not as dramatic as 2009’s 35% jump from 2008 filings, it does show that the effects of the housing crisis and persistent joblessness are taking their toll on American consumers.
However, there is a ray of sunlight – the rate of bankruptcy filings for the first quarter of 2011 has decreased from this time last year. The American Bankruptcy Institute and the National Bankruptcy Research Center found that personal bankruptcy filings have decreased to 340,012, down from 363,215. The ABI expects that bankruptcy filings in 2011 will decline from last year’s 1.5 million filings, which gives some hope that American consumers are now better able to manage their finances in the face of a down economy.
On the other hand, major business bankruptcies do not appear to be slowing down. In late 2010, video rental chain Blockbuster filed for Chapter 11 protection. Joining Blockbuster in early 2011 was bookseller Border’s Books. Just joining them is fast-food Italian restaurant Sbarro and gift-basket retailer Harry & David, both of whom recently filed Chapter 11 petitions. Electronics retailer Ultimate Electronics ended up liquidating its assets after filing its Chapter 11 petition early this year. Trendy clothier American Apparel has warned that they too may be forced to file for bankruptcy protection in the near future. These significant bankruptcy filings may continue as retailers, already hit by the recession, find that they cannot continue to operate in a climate where consumers have less disposable income and are less willing to spend.
The latest bankruptcy statistics paint a mixed message for the overall health of the U.S. economy. While the decline in consumer filings in the first quarter is an encouraging trend for the overall economy, it remains to be seen whether the effect of everything from high fuel costs to continued softness in the labor market will increase the number of bankruptcy filings.
For more information on the subject of this article, contact Jay Reding, an associate in Larkin Hoffman law firm’s Business Litigation and Bankruptcy Groups or the Larkin Hoffman attorney who customarily handles your matters. Larkin Hoffman Daly & Lindgren Ltd. has proudly served the legal and business counseling needs of clients since 1958. The firm includes 74 lawyers serving clients’ legal needs throughout the state, the country and around the globe. As a full-service law firm, it provides counsel and legal guidance in more than 20 areas of law to clients ranging from individuals to emerging companies and Fortune 500 corporations.