ALEXANDRIA, Va. — The American Bankruptcy Institute's latest report indicates that personal bankruptcy filings increased by more than 32 percent last year. The ABI's figures, which counted 1.06 million filings in 2008 against 801,840 in 2007, were confirmed by the Administrative Office of the United States Courts.
“Consumers are under great financial stress, with no immediate end in sight,” said ABI executive director Samuel Gerdano. “We expect the upward spike in personal bankruptcies to continue in 2009.”
Subprime dealers, lenders and third-party lead-generation providers may stand to benefit from an expanding tier of credit-challenged customers. Consumers with a recently discharged bankruptcy are often new to secondary financing and, depending on the type of bankruptcy, cannot file again for several years.
“We have been monitoring the steady growth of personal BK cases,” said Robert Davies, president of OnlineBKmanager.com. “The good news is our dealer clients are working with lenders like Tidewater, CapOne, AmeriCredit, Wachovia and many others to offer quality subprime loans to these individuals.”
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 was enacted in order to steer more U.S. debtors toward filing for Chapter 13 bankruptcies, which calls for a five-year repayment plan. Under a Chapter 7 filing, most debts are simply discharged.
“Currently, Chapter 7 bankruptcies represent over 75 percent of all cases being filed with the courts,” said Davies. “This fact contradicts previous thoughts that the 2005 law change would force more people into filing a Chapter 13 over a Chapter 7.
“In 2009," Davies concluded, "bankruptcy marketing will continue to prove its value to automotive retailers throughout the United States."
Open bankruptcies waiting to be discharged, by state, as of Jan. 6, 2009:
Alaska 683
Alabama 39,430
Arkansas 16,981
Arizona 12,310
