Bankruptcy Filings Skyrocket by 30% as Economy Tanks
There were 1,004,342 nonbusiness bankruptcy filings, a 30% increase, and 38,651 business filings, a 49% increase.
The data reflect the impact of the economic crisis, which was triggered in large part by the collapse of the housing market that surfaced during the summer of 2007. Since then, unemployment has increased, home values have plummeted and foreclosures have escalated-all factors that can lead people to declare bankruptcy.
In November, initial foreclosure proceedings were up 28% over the previous November and unemployment rose to 6.7%.
This year's filings were the highest since the fiscal year ending Sept. 30, 2006, the year after Congress revamped the bankruptcy laws. That year there were 1.1 million filings, compared with 1.7 million the previous year.
The law tightened eligibility requirements for Chapter 7 filings, which erases most debts, and pushed more consumers into filing under Chapter 13, which requires that creditors be paid.
There were 679,982 Chapter 7 filings during the year ending Sept. 30, 2008, a 40% increase from the previous year. Chapter 13 filings increased 14% to 353,828.
Tennessee, Nevada, Georgia, Alabama and Indiana had the highest rates of bankruptcy. The lowest rates were in the Virgin Islands, the Northern Mariana Islands, Guam, Alaska and Hawaii.
From July 1 through Sept. 30, bankruptcy filings increased 34% over the same period in 2007.
Trades Weigh In on IOLTAs
WASHINGTON -- CUNA and NAFCU praised the NCUA for eliminating the concept of a "qualifying beneficiary" in a revocable trust but are asking for additional clarification on other aspects of the agency's interim final rule.
The change, which the board initiated in September, a week after the FDIC made a similar policy shift, allows friends, in-laws, cousins, nieces and nephews to be beneficiaries under these insured accounts. Previously, only spouses, parents, siblings, children and grandchildren qualified as beneficiaries.
CUNA wants the agency to spell out more details about the insurance coverage for revocable trust accounts of more than $1.25 million. CUNA Regulatory Research Counsel Luke Martone wrote that the agency should provide a "clearer and simpler example" to demonstrate how the coverage would be structured.
He also urged the agency to consider changing the insurance coverage rules on interest on lawyers trust accounts so that it is based on whether the attorney establishing the account is a credit union member.
NAFCU Associate Director of Regulatory Affairs Tessema Tefferi suggested that the agency explicitly state in the regulation that there is a limit to five beneficiaries.