Consumer bankruptcy filings, after many months of low numbers due to tough new bankruptcy laws, are continuing to rise as the economy falters.
New statistics from the American Bankruptcy Institute (ABI) found that consumer bankruptcies increased 47.7 percent between April 2007 and April 2008.
The overall April consumer filing total of 92,291 was also an increase from the previous high of 86,165 filings recorded in March, which was in turn an increase from the total of 76,120 established in February 2008.
ABI executive director Samuel Gerdano warned that more bankruptcies were on the way.
"The sharp spike in consumer bankruptcies reflects the growing financial stress faced by American families, saddled with household debt and mortgage woes," Gerdano said. "We expect consumer bankruptcies to top 1 million new cases this year."
Chapter 13 filings, where an individual who files for bankruptcy is found to have income and debts that do not exceed specific amounts, continued to decrease, down to 31.14 percent from March.
Most individuals found bankrupt under Chapter 13 rules are usually put on payment plans or budgets to ensure creditors get at least some of their debts paid back.
Under the 2005 bankruptcy legislation passed by Congress, individuals filing for bankruptcy are forced to take a "means test" to determine if they have any available income after necessities such as food and clothing are covered.
Those who "pass" the test can file under the more forgiving Chapter 7 code, which enables discharge of debts and a fresh financial start, but most filers end up under Chapter 13.
After the new laws were passed but before they took effect, individuals scrambled to file under the old rules, leading to a massive drop-off in new filings after the changes took effect. But slowly, bankruptcy filings have been increasing, as consumers and businesses alike collapse under the weight of high gas prices, soaring food costs, maxed-out credit card debt, and stagnant wages.
Ironically, one of the chief sources of financial collapse for Americans today -- the loss of one's home due to crippling loans or inability to pay the mortgage -- is not protected in bankruptcy.
Under the current bankruptcy code, owners of a primary residence cannot protect their home in a bankruptcy proceeding, but owners of second or third homes -- many of which were bought to "flip" and make a quick profit -- can do so.
Some members of Congress, fearful of voters' wrath, had pressed to close the loophole in the bankruptcy laws as part of their various plans to help homeowners struggling with their mortgages, but the efforts were defeated after heavy lobbying by the financial industry.
