U.S. Bankruptcies Soar, Approach One Million

August 27, 2008 Updated: September 2, 2008

NEW YORK—Whether or not the U.S. economy is in recession is still up for debate, but according to the latest statistics from the U.S. Courts system, personal and business bankruptcies have increased around 29 percent during the last twelve months.

According to a release, bankruptcies filed in the last twelve months ending June 30, 2008 total 967,831 cases, a 28.9 percent increase over the same period prior year. The figures were released by the Administrative Office of the U.S. Courts on Wednesday.

Most of the bankruptcies—934,009—came from non-business filers, an increase of 28 percent. 33,822 businesses filed for bankruptcy in U.S. courts during the same period, a 42 percent jump.

One key statistic—the number of Chapter 11 bankruptcy protections filed—rose more than 30 percent. Chapter 11 aims to protect struggling and illiquid businesses and partnerships from creditors.

The U.S. government expects the number of filings to increase to around 1.2 million next year.

"As we continue to hear more bad economic news, we will continue to see bankruptcies spiral upwards," Jack Williams, scholar at the American Bankruptcy Institute said in an interview with ABC News.

The increase in non-business, or personal, bankruptcies is especially alarming to lawmakers. Many analysts believe that the increase is directly related to weaknesses in the housing market, where tens of thousands of U.S. homeowners defaulted on mortgages and face foreclosure on their homes.

Soaring gasoline prices and a rise in inflation and commodity prices—such as grain, beef, and sugar—have pinched U.S. consumers even further.

Bankruptcies of Seniors On The Rise

According to new analyses from the Consumer Bankruptcy Project sponsored by the AARP, Americans age 55 and older experience the highest increase in bankruptcies during the last 16 years. The study—jointly conducted by professors from Harvard University, Ohio University, and the University of Michigan—found that the risk of bankruptcy increases with age.

Consumers between the ages of 55 and 84 saw the highest jump in bankruptcy rates, the study found. In 1991, this age group comprised 8.2 percent of all filers, with a filing rate of 1.97 per thousand Americans.  By 2007, this group comprised
22.3 percent of all filers.

The researchers found that the average age of bankrupt consumer have risen, and filers above the age of 65 have more than doubled since 1991.

The survey found a positive trend—bankruptcy among those 34 or younger has decreased significantly during the last decade, a reflection of better financial education and increased financial independence.