In another sign the economic recovery is slow-going, consumer bankruptcy filings surged 14% in February compared with a year earlier, according to a report by the American Bankruptcy Institute.
The 111,693 cases filed last month also represented a 9% increase from January, the report said.
Ongoing financial distress is leading more Americans to file for Chapter 7 bankruptcy, which - if approved - allows a court to discharge most unsecured consumer debt, including credit card bills.
When a stricter bankruptcy law took effect in 2005, a key goal was to require more families to rely on Chapter 13 bankruptcy, which requires filers with regular income to repay debts in full, or in part, over several years. Yet the number of Chapter 13 filings decreased 3% last month from January, according to the American Bankruptcy Institute.
"The debt-stress overhang from years of consumer spending has a more acute impact now because of troubling economic times," says Samuel Gerdano, American Bankruptcy Institute executive director.
Business bankruptcy filings are rising, too. In February, there were 6,557 business filings, compared with 6,390 a year earlier, according to Automated Access to Court Electronic Records.
Gerdano expects that trend to continue, but he notes that business bankruptcies represent fewer than 10% of total filings.
Last year, there were 1.47 million bankruptcy filings, up 32% from 2008, according to data released by the Administrative Office of the U.S. Courts on Tuesday. Chapter 7 filings rose 41% in 2009, while Chapter 13 filings were up just 12%.
