Filings for Bankruptcy Up 18% in February
Americans filed for bankruptcy in growing numbers in February, buckling under the combined weight of rising energy prices, a weakening housing market and sky-high personal debts.
An average of 3,960 bankruptcy petitions were filed per day nationwide last month, up 18 percent from January and up 28 percent from a year earlier, according to Automated Access to Court Electronic Records, a bankruptcy data and management company.
February was the busiest month for filings since Congress overhauled the bankruptcy law in 2005. Bankruptcy experts said the rise was particularly worrisome because those changes made filing for bankruptcy more complicated and expensive.
“This number of bankruptcies may be under-representative of the true financial distress consumers are feeling because of the steps Congress has taken,” said Jack Williams, a scholar in residence at the American Bankruptcy Institute and a professor at Georgia State University.
The latest figures show the financial pain is spreading from states like California and Florida, which exemplified the housing boom and subsequent bust, to those along the Eastern Seaboard like Maryland, Virginia and Delaware, which were among the 10 states with the largest percentage increase in filings in January and February. “You are seeing a good-size uptick everywhere,” said Mike Bickford, president of Automated Access.
Bankruptcy experts caution, however, that data from just one or two months can be misleading.
“The monthly bankruptcy filing rate has a lot of cyclicality,” Robert M. Lawless, a professor of law at the University of Illinois College of Law, wrote on Tuesday on the widely read bankruptcy blog, Creditslips.org. Some experts, for example, say bankruptcies often seem to rise in February as debts from the holiday season come due. Even so, the trend is definitely upward, Mr. Lawless wrote. States as disparate as Kentucky and Rhode Island joined the top 10 list, and the absolute number of filings rose significantly.
Mr. Williams expects the number of bankruptcies nationwide to reach 1.2 million to 1.4 million this year, up from 826,732 in 2007; Mr. Lawless expects more than one million. (In 2004, the last year with a normalized set of data, 1,597,462 petitions were filed, according to Automated Access.)
The states with the most significant increase in bankruptcy filings during the first two months of 2008 were California, with a 33 percent increase; Maryland, up 29 percent; and Florida, with a 26 percent rise, the data shows. Filings fell in 16 states, including Colorado, Indiana, Ohio, South Dakota, Kansas, and Wyoming.
Proponents of the bankruptcy law argued in 2005 that some consumers were abusing the law, using Chapter 7, or liquidation, to shed credit card debt. The bill, supported by both Republicans and Democrats, “increased the expense for everyone and reduced the protections for everyone,” said Mr. Williams.
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