• 16
  • February
    2011

In a continuation of a five-year increase that began after the passage of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, consumer bankruptcy filings continued to rise in 2010. Chapter 13 bankruptcies increased by almost 10 percent, with disproportionately high numbers reported in many areas of the country that have been hardest hit by foreclosure.

Throughout the country, there were 438,913 Chapter 13 bankruptcy filings in 2010. This represents an 8 percent increase from 2009's 407,000 filings. Chapter 13 bankruptcy is often used as a strategic move for a homeowner facing bankruptcy, as it allows a bankruptcy filer to remain in their home and keep other assets such as cars while they undergo a financial restructuring and a form of debt repayment.

Because of its usefulness in staving off foreclosure, Chapter 13 bankruptcy filings were the highest in states with struggling real estate markets and high foreclosure rates. Specifically, the 9th Judicial District, which includes Nevada, California, Arizona, New Mexico, and other states that have been hardest hit by the housing market crash, posted more Chapter 13 bankruptcy filings in 2010 than any other region of the country.

The number of Chapter 13 bankruptcy filings in 2010 was second only to the number of Chapter 7 bankruptcies. Because Chapter 7 allows a debtor to completely liquidate all of his or her debt and start fresh, it is an appealing option to many people who do not see themselves finding a way out of debt because of unemployment or other dire financial circumstances. Last year, there were approximately 1.1 million Chapter 7 bankruptcy filings in the U.S.

Source: Housing Wire, "Chapter 13 bankruptcy filings up 8% in 2010", Christine Ricciardi, 15 February 2011