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The number of bankruptcy liquidations, both business and personal, is skyrocketing across the country as cash-strapped consumers and businesses surrender to mounting economic pressure. The spike in bankruptcy filings is driven by Chapter 7 liquidations, a likely result of devastating losses in the value of assets, particularly real estate, as well as unforgiving credit markets. Read on to learn more about the bankruptcy epidemic that is sweeping the nation.
The Stats
During the 1st quarter of 2009, there were 316,158 total bankruptcy filings, including Chapters 7, 11, and 13, in the United States. In the 2nd quarter, there were 365,059 total bankruptcy petitions, a one-quarter increase of 15.5 percent. Of the bankruptcies filed in the 2nd quarter, an astonishing 71.8 percent were Chapter 7 filings. Economists expect the number of bankruptcies to continue to soar throughout the rest of 2009.
Setting Records
The bankruptcy figures for 2009 are the highest the country has seen since the bankruptcy explosion that took place prior to federal reform at the end of 2005. Bankruptcies are also up significantly from the same period in 2008. First-quarter filings were up over 30 percent from last year, while 2nd-quarter filings rose by almost 37 percent. The trends over the past year may indicate that the recession has caught up with many individuals and companies that can no longer withstand the hardscrabble economic climate.
Led by Chapter 7 Filings
What’s unique about the most recent uptick in bankruptcy filings is the percentage of Chapter 7 petitions. Last year, Chapter 7 bankruptcy filings comprised just 64 and 68 percent of total filings for the first and second quarters, respectively. In 2009, Chapter 7 filings accounted for 71 percent and 72 percent of total petitions. Again, the percentage of Chapter 7 filings is the largest since the last quarter of 2005. The larger portion of Chapter 7 petitions may indicate more economic desperation among consumers and businesses. A Chapter 7 filing does not require petitioners to work out a repayment plan with their creditors, something many may not be capable of after the protracted recession.
Areas Hit the Hardest
So far this year, Southwestern and Southern states have the largest number of bankruptcies per capita. Nevada has the most filings in the Southwest, while Tennessee, Georgia, and Alabama are all struggling in the South. In the Midwest, Michigan, Indiana, and Ohio also have some of the highest per-capita numbers in the country.
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