Consumer Bankruptcies to Hit 1.4 MillionThe number of consumer bankruptcies may hit 1.4 million by the end of this year, says the American Bankruptcy Institute. The number of bankruptcies has risen by one-third this year, as more jobs have been lost and loans are getting harder to qualify for, says the research group.
More than 126,000 consumers filed for bankruptcy in the US in July -- a 34 percent increase over the filings recorded in July 2008 -- says the ABI's report issued on August 4. The increase is after a 36.5 percent rise in personal bankruptcies nationally in the first 2 quarters of 2009, with 675,351 says the ABI, interpreting data from the National Bankruptcy Research Center.
The rising unemployment on top of high pre-existing debt burdens is a formula for higher bankruptcies through the end of this year, says ABI Executive Director Samuel Gerdano. Banks are also hurt in this, as the steep rise in filings by consumers is hitting commercial banks. JP Morgan Chase has predicted more losses on consumer loans last month even while it posted a second-quarter profit. The bank does not expect credit card business to make a profit in 2009 or next year, and the bank has increased its loss projections for prime and subprime mortgages.
Tighter controls on who can qualify for bankruptcy went into effect in 2005 with the Bankruptcy Abuse Prevention and Consumer Protection Act, which was a reform package designed to make it harder for consumers to get court approval to clear uncollateralized debt.