Consumer Bankruptcy Filings up 48 Percent

May 2, 2008 No Comments »

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U.S. consumer bankruptcy filings increased 47.7 percent nationwide during April compared to the same period a year ago, the American Bankruptcy Institute (ABI) said today.

Total consumer filings in April were 92,291, representing a 7.1 percent increase the 86,165 filings reported in March, based on data collected by the National Bankruptcy Research Center.

Chapter 13 filings, which allow consumers to set up a repayment plan if they’re currently behind on their bills, accounted for 31.14 percent of all consumer cases during the month, slightly lower than in March.

ABI Executive Director Samuel J. Gerdano attributed the spike in filings partially to the current mortgage crisis and expects one million new consumer bankruptcies cases this year.

Late last year, a bill called the Emergency Home Ownership and Mortgage Equity Protection Act of 2007, which would allow bankruptcy judges to modify and reduce principal mortgage balances on primary residences, was gaining steam.

But in late February, President Bush signaled that the bill would likely face a veto if passed by the Senate, largely because critics such as the Mortgage Bankers Association argued that it would result in higher borrowing costs (in the form of higher mortgage rates) for homeowners and a spike in bankruptcy filings.

However, consumer advocacy groups such as the Center for Responsible Lending have argued that such measures could help struggling borrowers negotiate with their mortgage lenders more effectively, noting that judges can modify terms on yachts and second homes, but can’t help families trying to save their homes.

(photo: redvers)

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