A recent report from the American Bankruptcy Institute (ABI) revealed that the number of Americans who filed for bankruptcy (Chapter 7 bankruptcy, Chapter 11 bankruptcy and Chapter 13 bankruptcy) declined precipitously from calendar year 2010 to calendar year 2011 -- falling by as much as 12 percent.

Citing figures from Epiq Systems, Inc., the ABI press release indicated that there were approximately 1,379,113 bankruptcy filings in the U.S. during calendar year 2011 as compared with 1,561,008 bankruptcy filings in calendar year 2010.

In regard to consumer bankruptcy, the ABI report indicated that Chapter 7 bankruptcy filings declined by 13 percent in calendar year 2011 (965,423 Chapter 7 filings in 2011 v. 1,111,236 Chapter 7 filings in 2010), while Chapter 13 bankruptcy filings declined by eight percent in calendar year 2011 (401,588 Chapter 13 bankruptcy filings in 2011 v. 435,242 Chapter 13 bankruptcy filings in 2010).

What was behind this fairly significant drop in bankruptcy rates?

"The decline in total filings reflects the retrenchment in consumer spending associated with a down U.S. economy," said Samuel J. Gerdano, Executive Director of the ABI. "As consumers continue to deleverage their debt and access to credit remains tight, bankruptcy filings will continue to decrease."

Interestingly, the ABI report also indicated that the five states with the highest per capita filing rate (i.e., total filings per 1,000 people) in calendar year 2011 were 1) Nevada (8.98), 2) Georgia (7.35), 3) Tennessee (7.34), 4) Utah (6.53), and 5) Alabama (6.37).

For those who may not know the difference between Chapter 7 and Chapter 13, we offer the following brief explanation

  • In Chapter 7 bankruptcy, a bankruptcy trustee will collect and liquidate some of your assets. The income earned through this sale of assets will then be applied to your unsecured debts and any remaining balance will be discharged.
  • Chapter 13 bankruptcy is a viable option for those who want to repay their debts, but require some form of immediate relief from collections and/or additional late payment penalties and interest. In general, Chapter 13 accomplishes this by arranging a legal debt workout (i.e., 3-5 year repayment plan) that will be reviewed, approved, and managed by the bankruptcy court.

If you would like to learn more about Chapter 7 bankruptcy or Chapter 13 bankruptcy, take the time to speak with an experienced legal or financial professional.

Stay tuned for further developments from our Phoenix bankruptcy blog ...

The following post is for informational purposes only and is not to be construed as legal advice.

Source:

American Bankruptcy Institute, "Total bankruptcy filings decrease 12 percent in 2011, commercial filings fall 19 percent" Jan. 4, 2012