If you currently find yourself in dire financial straits, you are not alone. Bankruptcy filings remain at record levels as more families are being forced to deal with a struggling economy. In 2009, personal bankruptcy filings increased by almost one-third as more and more Americans faced foreclosures, decreased home values and job losses. This led to over 1.3 million Americans filing for bankruptcy. That rate has held relatively steady as 1.4 million people decided to file bankruptcy between October of 2010 and September of 2011.
Chapter 7 Bankruptcy
In particular, Chapter 7 bankruptcy filings are on the rise, despite the fact that in 2005 the federal government stiffened the rules for Chapter 7 filings in an attempt to encourage more people to choose Chapter 13 bankruptcy. Of the 1.4 million who filed bankruptcy during fiscal year 2011, approximately 1 million filed for Chapter 7 protection. Chapter 7 bankruptcy uses the debtor's assets to pay off creditors, after which obligations to creditors are discharged. Chapter 7 is sometimes referred to as "liquidation" bankruptcy.
The other common individual bankruptcy filing, Chapter 13, involves the debtor paying off creditors according to a repayment plan, usually three to five years. The debtor will get relief from high interest rates and late payment penalties, however.
One theory on why more bankruptcy filers are choosing Chapter 7 is because of the high unemployment rate. In order to feasibly pay off creditors on a payment plan, the filer must have steady income. With the unemployment rate only recently dropping to under 9 percent (approximately 13 million workers unemployed) Chapter 7 is the best option for many.
Other Factors Contribute to Bankruptcy
Bankruptcy is not just for those struggling to bring in income, however. Many higher-income bankruptcy filings come as a result of job loss, salary cuts or unexpected medical expenses. When individuals are no longer able to pay the expenses that their salary previously allowed, they struggle trying to pay off their debt and keep paying their mortgage.
Sometimes, the only choice is to file a bankruptcy petition. If you believe bankruptcy may be the best choice to get back on track with your finances, contact a bankruptcy attorney as soon as possible - the sooner you file, the sooner creditors will stop calling and the sooner you will be on the path to financial recovery.