The statistic is breathtaking: “More Americans filed for bankruptcy last year in the United States than in the entire decade of the 1960s,” reports an article on MSN Money. The slowness of the recovery combined with the mountain of debt has put more people in the position of filing for bankruptcy than ever.
With the recession, more people have had problems paying their bills, in part, due to the fact they have more debt. From 1990 to 2003, credit card lending increased from $173 to $683 billion. Much of the lending was for subprime credit cards, which grew even faster than the rest of the credit industry.
Combine this massive increase in credit growth with incomes that had been flat or declining for 30 years, and mix in the most severe economic crisis since the great depression and the results are hardly surprising.
Bankruptcy Filings at Record Levels
The American Bankruptcy Institute (ABI) reports personal bankruptcies rose to 1.53 million in 2010. The number of filings has increased each year since 2005, when bankruptcy laws were revised by the Bankruptcy Abuse Prevention and Consumer Protection Act.
Ironically, the law was passed with the intention of making it more difficult to file a Chapter 7. Still, two-thirds of the filings last year were under Chapter 7.
Last year's number far exceeds the 1,407,788 total consumer filings recorded in 2009, a trend that the ABI attributes to growing debt and a weakened economy.
Economic Reality: What Bankruptcy Means Today
Bankruptcy used to carry a much greater sting than it does today. Credit was much harder to obtain, and many felt the need to protect their credit worthiness at all costs. Bankruptcy was seen as a last resort.
With much easier credit, and easier bankruptcy, many debtors find that it is easier to obtain credit after they have filed a bankruptcy than when they are struggling with their debt payments.
Some debtors report receiving offers for credit cards even before their bankruptcy is completed. The reason is simple. Once you have discharged all of your debts, all of your disposable income is available for making payments on a new credit card.
The stigma is further diminished by the knowledge of others filing (over four million since 2008); many people know someone who has filed for bankruptcy. Most are not cavalier about their debt, but were overwhelmed by job loss, medical problems and other debts.
If you find yourself receiving non-stop collection calls and demand letters, speak with a bankruptcy attorney. They can examine your situation and work to help you get a fresh financial start.