- ‘Pocket drones’: U.S. Army developing tiny surveillance tools for the next big war
- Belgian cafe posts sign: Dogs allowed, but Jews stay out
- Gen. Dempsey: Pentagon studying Russian readiness plans not viewed ‘for 20 years’
- John McCain: Botched, two-hour execution of murderer is ‘torture’
- House GOP ready to move border bill
- Bomb squad called after live WWII artillery washes on Cape Cod beach
- HAYDEN: Intelligence, evidence and the case against Russia
- Ohio university quiz implies atheists are naturally smarter than Christians
- Rep. Henry Cuellar on border crisis: ‘Playing defense on the one-yard line’
- Activists vow to occupy fast-food restaurants to get higher pay
Soaring rate of bankruptcies expected to continue in 2010
Question of the Day
Not only did U.S. consumer bankruptcies jump by nearly a third in 2009, but bankruptcy analysts expect matters to worsen again in 2010 as the deepest economic downturn since the Great Depression continues to work its way through American households.
Consumer bankruptcy filings exceeded 1.4 million last year compared with 1.06 million in 2008, an increase of 32 percent, according to the American Bankruptcy Institute (ABI), a nonpartisan, independent research and education organization. The ABI relied on data compiled by the National Bankruptcy Research Center.
“A combination of economic stress, including high debt loads, rising unemployment and unsustainable mortgage burdens, left many consumers with little choice but to seek the financial relief of bankruptcy,” ABI Executive Director Samuel J. Gerdano said.
“The future is more of the same,” he said.
Robert Lawless, a law professor at the University of Illinois who has conducted extensive research on consumer bankruptcy, said he expects 1.7 million people will file for bankruptcy this year.
Such a figure would be the second highest on record, trailing only 2005’s total of 2.04 million. The 2005 number is distorted by a rush of bankruptcy filings before a tougher law took effect.
“I think I am going to be very busy for the next five years,” said Claire Ann Resop, a Wisconsin bankruptcy lawyer. “I tell my children, ‘Mommy works in a growth industry.’ ”
Overburdened by huge mortgages, plunging home values, unsustainable credit card debts, tightening credit conditions and soaring joblessness, families have been carrying an “overhang of consumer debt” for a decade or so as a result of a low savings rate and overconsumption.
The resulting “debt bubble,” Mr. Gerdano said, led to a soaring bankruptcy rate.
“The ability to tap into home equity to bridge difficult times is no longer available,” he said, because home prices have plunged since the housing bubble began to deflate in 2006.
In 2006, for the first time ever, total U.S. household debt exceeded personal income, Mr. Lawless noted, leading to more bankruptcies in the short term.
“The biggest determinant of personal bankruptcy is consumer debt, including credit cards, car loans and home mortgages,” he said.
The recession, which began in December 2007, made a difficult situation much worse.
“People can no longer borrow to stave off the day of reckoning, mainly because of the financial crisis, which has been unprecedented in terms of consumer borrowing,” Mr. Lawless said.
Home equity loans disappeared as fast as the equity itself, and credit card companies tightened considerably in the face of huge losses.
TWT Video Picks
Second- and third-stringers eye 2016 if front-runner stumbles
- 'We're coming for you, Barack Obama': Top U.S. official discloses threat from ISIL terrorists
- Russia shipping sophisticated weapons systems to Ukraine separatists
- NAPOLITANO: What if our democracy is a fraud?
- John McCain: Botched, two-hour execution of murderer is 'torture'
- Michelle Obama says money in politics is bad, asks donors for 'big, fat check'
- EDITORIAL: Detroit's water 'spigot bigots'
- Brian Kelly, Notre Dame ready for different route to title
- Ted Nugent loses second casino gig for 'racist remarks'
- Obama orders Pentagon advisers to Ukraine
- White House readies for House GOP impeachment push: 'Foolish' to ignore
Obama's biggest White House 'fails'
Celebrities turned politicians
Athletes turned actors
20 gadgets that changed the world
Fighting in Iraq