Bankruptcy Filings Jump 48% in First Half of 2007

Bankruptcy filings in the first half of the year rose nearly 50 percent compared with the same period in 2006, according to a release last week from the American Bankruptcy Institute. The Institute reports on filings with the Administrative Office of the U.S. Courts. There were 404,090 total filings through June 30, up 48.2 percent from the 272,604 cases filed through June 30 2006, the ABI reported.

The bankruptcy numbers continue to rise following a dramatic drop in 2006 brought about by the federal bankruptcy law enacted in October of 2005. Filings in the first half of 2007 by individual households with consumer debt – including filings under Chapters 7, 11 and 13 – totaled 391,105, a 48 percent increase from 263,660 in the same period a year ago.

Chapter 7 filings totaled 240,839 through the first half, an increase of more than 55 percent from 154,924 in the same period a year ago. Chapter 7 filings accounted for 61.6 percent of all consumer filings. Chapter 13 filings rose more than 38 percent to 149,000 this year from 108,484 a year ago. Chapter 13 filings account for 38.3 percent of all consumer filings.

One provision of the bankruptcy law was intended to send more consumers into Chapter 13 bankruptcy where they would create a plan to repay a portion of their debts, in contrast to Chapter 7 where most debts are written off. Chapter 7 filings reached their peak in the fourth quarter of 2005 when they accounted for 85 percent of all consumer filings. That quarter Chapter 13 filings account for 14.3 percent of all consumer filings.

Chapter 7 filings fell to 56.2 percent of all consumer filings in the first quarter of 2006, but have since risen to 62.4 percent in the second quarter of this year. 

There were 267 Chapter 11 filings in the first half, up from 252 a year ago.