More Americans are going broke as a result of the ongoing mortgage crisis, according to the latest report from the American Bankruptcy Institute (ABI).
Last month, 106,266 consumer bankruptcies were filed, a 20 percent increase from September’s numbers and 40 percent more than those reported in October 2007.
“October’s sharp spike in new consumer bankruptcies confirms the severe financial stress on household budgets caused by high debts, flat incomes, and declining home values,” said ABI Executive Director Samuel Gerdano, in a statement.
“We expect the 2008 numbers to be the highest since the new bankruptcy law went into effect in 2005.”
Gerdano is referring to the U.S. Bankruptcy Abuse Prevention and Consumer Protection Act, which made it more difficult for consumers to discharge debt under Chapter 7, forcing most to file a Chapter 13 bankruptcy and eventually repay their debts.
October marked the first time consumer bankruptcies have surpassed the 100,000-mark in a single month since the law was enacted three years ago.
So far in 2008, consumers have filed more than 880,000 bankruptcy petitions, already surpassing the 822,000 filed for all last year.
Earlier this year, lawmakers pushed two bills that would allow bankruptcy judges to modify terms of mortgages tied to primary residences, though groups like the MBA vehemently opposed such measures, claiming they would increase borrower costs tremendously.