Arlington, VA – The Consumer Bankers Association (CBA) recently reported the number of consumer bankruptcies is on the rise, according to data collected from the Administrative office of the US Courts.
The CBA report notes that 603,139 consumer bankruptcies were filed during the first three quarters of 2007, which represents a 40 percent increase over the 430,364 cases filed over the same period in 2006.
Though the House Judiciary Committee was working to make bankruptcy more favorable for mortgagees, the effort was stalled after the cancellation of a committee vote on The Emergency Home Ownership and Mortgage Equity Protection Act of 2007 (H.R. 3609) on November 7. As CBA explains, this bill would amend federal bankruptcy law to allow bankruptcy judges to modify the terms of a mortgage in a Chapter 13 proceeding, which would allow judges to reduce the value of the loan, extend the terms of the loan, lower the interest rate, or delay the effective date of an adjustable rate increase.
The CBA advises against this bill, however, saying that it has joined with other industry groups “in warning that the unintended consequences of such legislation could raise borrower costs, disrupt the mortgage business and harm the economy.”
According to statistics compiled by the American Bankruptcy Institute, officials pointed out that the bankruptcy filing rate per thousand U.S. residents totaled 2.62 for all chapters during the 12-month period ending Sept. 30, 2007, as 1.58 Americans per thousand filed for chapter 7, while 1.02 per thousand filed for chapter 13 bankruptcy.
Tennessee led all states with the highest per capita filing rate in the country, with 6.19 residents per thousand filing in all chapters, and it also had the highest per capita filing rate for chapter 13 filings at 3.86. Indiana had the highest per capita filing rate for chapter 7 bankruptcy at 3.20 per thousand for the 12-month period ended Sept. 30, 2007.
Officials also point out that totals for both consumer and business filings during the first three quarters of 2007 also eclipsed those reached for the full calendar year of 2006. The overall percentage of consumers filing for chapter 13 protection fell slightly from 41 percent during the first three quarters of 2006 to 39 percent over the same period in 2007; conversely, the percentage of chapter 7 consumer filers increased to 61 percent during the first nine months of 2007 from the 58.5 percent recorded during the same period of 2006.