Bankruptcy stats raise questions about recovery

11.07.09
By Timothy Green

Recent indicators generally show signs of a slowly-improving economy, although some things are running against that trend - such as the latest nationwide bankruptcy rates.

According to the American Bankruptcy Institute, consumer filings increased 8.9 percent between September and October. Chapter 13 bankruptcies accounted for 28.5 percent of all consumer filings last month, which was said to be higher than September levels.

The executive director of the ABI, Samuel Gerdano, said that the latest figures show "the sustained stress on the U.S. economy" and noted that along with the increased rate of consumer filings, business bankruptcies were up by 7 percent in the same period.

The organization expects total bankruptcies to exceed 1.4 million for the year, which would be the highest number since 2005. A total of 135,913 consumers filed for bankruptcy in October, while that figure at this time last year stood at 106,266.

A report from Bloomberg News points out that the year's total of bankruptcies has already exceeded the number recorded in 2008. A bankruptcy also affects consumers for the long term by damaging their credit score for as long as 10 years.

Much of the upswing in bankruptcy levels may be traceable to unemployment rates that have remained stubbornly high, as well as a growing number of workers facing growing debt problems as their benefits expire.

This problem may ease somewhat in the coming days as Congress takes action to extend unemployment benefits for some of these workers. Some economic factors have been looking stronger in recent months, but other factors like bankruptcy and unemployment will continue to invite speculation about the strength of the economic recovery.

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Bankruptcy rates are undermining confidence among many consumers.