The country's economic difficulties took an acute toll on individuals and businesses last year as the number of filings for bankruptcy rose by 31.9%, according to data released last week by the Administrative Office of the U.S. Courts.
There were 1.4 million bankruptcy filings in 2009, compared with 1.1 million in 2008, a 32% increase in nonbusiness filings. Last year, there were also and 60,837 business filings, a 40% increase from 2008.
According to data compiled by the NCUA, 324,028 members of federally insured credit unions filed for bankruptcy in 2009, a 42.2% increase over the 227,852 members who made such filings in 2008. Most of the filings were under Chapter 7, which saw a 48.6% increase over 2008.
In 2009, there was a 63.1% increase in the size of outstanding loans subject to bankruptcy and a 60.1% increase in the value of loans charged off due to bankruptcy.
Last year, 20.76% of all loans charged off were the result of bankruptcies, a 9.9% increase over the 18.9% rate in 2008.
Overall, the vast majority of bankruptcy filings-1.1 million-were Chapter 7, compared with 744,364 in 2008. There were 406,962 Chapter 13 filings last year, compared with 362,705 in 2008. In 2009, there were 15,189 Chapter 11 filings, compared with 10,160 in 2008. There were 544 Chapter 12 filings in 2009, up from 345 in 2008.
And despite the improved economy, bankruptcy filings are continuing to increase. The American Bankruptcy Institute reported that in February consumer bankruptcies rose 9% over their January level and were 14% higher than in February 2009.
There were 111,693 consumer bankruptcies last month, according to the institute, which projects that there will be more than 1.5 million bankruptcy filings in 2010.
"While Congress and the Obama administration continue to consider measures to reduce high unemployment and mortgage burdens, families with increasing debt loads have little choice but to continue to turn to bankruptcy for financial relief," ABI Executive Director Samuel J. Gerdano said in a statement.
If the institute's prediction proves correct, it would be the highest number of bankruptcies since 2005, the year before the most recent overhaul in bankruptcy law took effect. In 2005, there were 1.6 million bankruptcy filings.
During the debate over that law, which CUNA and NAFCU backed, CUNA said that bankruptcy accounted for $90 million, or 40% of all credit union losses each year.
The law tightened eligibility requirements for Chapter 7 filings, which erases most debts, pushed more consumers into filing under Chapter 13, which establishes a creditor repayment plan.