The Administrative Office of the U.S. Courts has released its 2010 Fiscal Year statistics revealing that the overall number of bankruptcy filings increased 13.8 percent in the period of October 1, 2009 to September 30, 2010.
In FY 2010, filings rose for personal bankruptcy chapters:
- Chapter 7 filings in FY 2010 totaled 1,146,511, up 15.9 percent from the 989,227 Chapter 7 filings in FY 2009.
- Chapter 13 filings rose 9.2 percent, from 398,210 in FY 2009 to 434,839 in FY 2010.
The irony of these figures is that critics of the bankruptcy system passed bankruptcy reform laws in 2005 designed to decrease the number of Chapter 7 bankruptcy filings and force more people to file Chapter 13 bankruptcy . But if you look at the numbers it is clear that there are far more debtors filing Chapter 7 bankruptcy than Chapter 13 bankruptcy and for very good reason. One of the fallacies that the 2005 bankruptcy reform laws were based upon was that there were hordes of bankruptcy "cheaters" who were abusing Chapter 7 bankruptcy as an easy way to wiggle out of their financial responsibilities.
And as we all know the biggest problem with fallacies is that they are based on flawed logic. The truth is that most debtors who file Chapter 7 bankruptcy are doing it as a last resort. Most people wait until they are down to their last dollar before they even take the time out to find out about their bankruptcy options. Unfortunately, there is still a lot of shame surrounding personal bankruptcy. And we say personal bankruptcy because businesses understand that bankruptcy is often a necessary and helpful tool. It will be quite telling to see what those numbers look like as the move through the year which is supposedly the year of "recovery" according to some economists.