Bankruptcy figures keep rising amid tough financial climate

12.17.08
By Timothy Jones

Considering the current economic climate, it may come as no surprise that personal bankruptcy filings are on the rise.

According to figures released by the Administrative Office of U.S. Courts, during the government's fiscal year - which ended September 30th - total bankruptcy filings increased by 30 percent.

The data indicates that those filing for Chapter 7, which liquidates most of an individual's assets to pay off creditors and then cancels all remaining debts, rose by 40 percent.

Meanwhile, the number of people choosing Chapter 13 bankruptcy, which allows a debtor to repay what they owe over a longer period but does not erase debts, saw a 14 percent rise.

It seems that the difficult economy is driving more people to take this drastic step, but is it really a wise decision?

The answer depends on your particular situation. Even if you have significant credit card debt and are suffering financially, you should make sure you investigate all of the repercussions of bankruptcy before deciding it is right for you.

Speaking to CNBC recently, consumer advocate John Ulzheimer reminded people that both types of bankruptcy will stay on your credit report for 10 years, which makes it nearly impossible to obtain unsecured debt.

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More people are declaring bankruptcy this year