BOSTON – The number of personal bankruptcy filings in the Bay State has more than doubled over the past two years, according to a report from The Warren Group.
“It’s clear that many consumers are hurting in this challenging economy,” Timothy M. Warren Jr., chief executive of The Warren Group, said of the Feb. 11 report. “Job layoffs and mounting debt have pushed more and more people to file for bankruptcy protection.”
The state had 11,638 filings under Chapter 7 of the U.S. bankruptcy code in 2008, the business and real estate data publisher found. Ninety-eight percent of them were by individuals.
Last year’s Chapter 7 total was a 41 percent increase from the 8,245 filings of the year before and a 148 percent increase from the 4,698 filings the state saw in 2006. But it was still well below the 22,413 filings made in 2005, when filings surged in advance of a third-quarter change in federal law that required people to seek Chapter 13 protection instead, if their income exceeded the state median. (READ MORE)
Chapter 7, the most common option for individuals seeking bankruptcy protection, allows a filer to wipe out most debt that remains after they use nonexempt assets to pay off creditors. It accounted for three-quarters of bankruptcy filings in Massachusetts last year. Chapter 13 protection instead requires debtors to establish a three-year or five-year repayment plan.
Massachusetts saw 3,688 filings last year under Chapter 13. That was 11.2 percent fewer than the 4,154 filings made in 2007, but 46 percent more than the 2,524 filings in 2006.
Total filings last year under both provisions amounted to 15,326. That was an increase of 23.6 percent from the 2007 total of 12,399 and 112.2 percent from the 17,222 petitions filed in 2006.
“In the past, many desperate homeowners used to rely on home equity loans to pay off bills,” Warren noted. “But as home values have plummeted and owners are left without home equity, a growing number are resorting to bankruptcy.”
Nationwide, nearly 1.1 million petitions for bankruptcy protection were filed last year, an increase of more than 30 percent compared with 2007, according to the American Bankruptcy Institute. More than 97 percent of those filings were by individuals.
The Warren Group Inc. is a provider of New England real estate data and the publisher of Banker & Tradesman and other journals. Additional information is available at www.TheWarrenGroup.com.
