Saturday, April 3, 2010

Mind-boggling Personal Bankruptcies In March 2010

The number of personal bankruptcies in March has reached mind-boggling levels. Federal reports indicate 158,000 bankruptcy filings in March. That works out to 6,900 per day and a rise of 35% from February.

The reason for this jump is mainly due to unemployment which rose to nearly 17% for all categories labeled by the U.S. Labor Department.

Katherine M. Porter of the University of Iowa said: "Fewer people are trying to save their homes. ... They realize their payments are not affordable and bankruptcy judges do not have the power to adjust the mortgages to make them more affordable."

The greatest rise in bankruptcy filings are under Chapter 7, which is easier than Chapter 13. With Chapter 13, you need ongoing income and are able to reorganize your debts. Of the 158,141 bankruptcy filings in March, some 75%, or 118,505, were under Chapter 7. Chapter 7 filings have increased about 73% in 2009.

Professor Porter went on to say, "We think that means fewer families think they're really going to save their homes. ... They don't have any equity, so why try to keep up with their home payments? People use their tax refunds to pay their attorney fees."

The personal bankruptcies statistics contrast sharply with the ongoing stock market rally and Wall Street exuberance. This makes me wonder: when will fantasy and reality come together?