Consumer Bankruptcies Rise to Pre-BAPCPA Level

July 19, 2011

According to a recent Congressional Research Service report, entitled: “Consumer Bankruptcy and Household Debt“, following the October 2005 implementation of BAPCPA, there was a significant decline in personal bankruptcy filings, as many “rushed to the courthouse” prior to the new law taking effect. However, the number of personal bankruptcy filings have continually risen to 1.5 million in 2010, reaching the pre-BAPCPA level.

After the 2006 lull, filings rose 37% in 2007, an additional 30% in 2008, and another 31% to in 2009 – then increasing in 2010 comparably to the pre-BAPCPA level of in 2010.

Several factors considered in the report include:
  • The percentage of household disposable income going to repay loans, rose from 10.8% in 1993 to 13.93% in 2007 but has declined to 11.51% in 2011;
  • There is a much higher rate of financial distress—using over 40% of income to repay debt—among lower-income families; and
  • A substantial decrease in revolving credit debt following the beginning of the recession in December 2007, declining 18.5%.

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