Consumer and commercial bankruptcy filings are on pace to reach a stunning 1.5 million this year, according to a report from Automated Access to Court Electronic Records.The pattern of foreclosures across the US which is reflected here also shows that the sun belts have been particularly hit in the recession and personal bankruptcies undoubtedly will show some correlation from an economic geography perspective.
While well below the record 2 million filings in 2005, the number of filings is up sharply from last year's 1.1 million, says Robert Lawless, professor of law at the University of Illinois.
Bankruptcy filings took a dramatic nose dive after a 2005 bankruptcy reform measure was signed into law to curb bankruptcy abuse and make it harder to erase debts.
"People are coming to us in much worse shape than they used to be," says David Jones, president of the non-profit Association of Independent Consumer Credit Counseling Agencies. "We used to be able to help 20% to 25% of people who came to us, and now we can only help 7% to 8%."
Last month, commercial filings hit 376 a day, up from 255 in May 2008. Hartmarx, which manufactures and markets apparel, and Silicon Graphics, a manufacturer of computer workstations and storage products, were among the filers.
Bankruptcy filings are not climbing at the same rate in every state. Nevada, Michigan and California had the biggest per-capita increase in bankruptcy filings in May, according to AACER.
"Nevada doesn't surprise me," Pottow says. "It is ground zero of the housing crisis."
And California also has suffered from the boom and bust of the housing market. By contrast, Michigan is dealing with the collapse of the auto industry.
The recent bankruptcy filings of Chrysler and General Motors, along with plant closings and job losses, will spark even more consumer bankruptcy filings, Pottow says.
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