Personal bankruptcies reach new record

11.06.08
By Nicholas Storie

Filing for bankruptcy is an option of last resort - although it can help people who are in serious financial trouble, it also leaves a black mark on your credit score that can last for up to a decade.

Now, new figures indicate that more Americans are choosing to file for bankruptcy, a trend which reflects the gloomy conditions of the economy in general.

A report from the American Bankruptcy Institute reveals that a total of 106,266 consumers filed for bankruptcy in October - more people than had done so during any month in the past three years.

In October 2005, the U.S. Bankruptcy Abuse Prevention and Consumer Protection Act took effect, which made it more difficult for individuals to opt for Chapter 7 bankruptcy protection.

If this many people have successfully passed the means test required by the act - which would mean they do not have sufficient income to repay their debts - it suggests many Americans are facing considerable financial obstacles.

"October's sharp spike in new consumer bankruptcies confirms the severe financial stress on household budgets caused by high debts, flat incomes, and declining home values," commented ABI executive director Samuel J. Gerdano.

If you have already confronted bankruptcy, be aware that there are some steps you can take to start rebuilding your credit score.

Experts suggest that you should first assess all three of your credit reports and credit scores to determine exactly how much work needs to be done.

Even if you are still years away from the happy day when your bankruptcy will be removed from your credit report, you can look into applying for a secured credit card that is specifically aimed at helping people rebuild their credit.

Having a record of using credit responsibly can be the first step toward reconstructing your financial health.

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