In The Poor Economy, Bankruptcy Rises

Pay cuts and Layoffs goaded more people into bankruptcy last year, and researchers say that the situation will not be likely to improve until the unemployment problem improves. In Wisconsin, bankruptcy filings raised to 30 percent in 2009. This came on top of a 35 percent increase in the preceding year.

According to bankruptcy attorneys, it isn’t only layoffs and firings that are encouraging people to file. It’s the losses of once-regular over time pay and full time status that have left debtors unable to keep up with monthly payments that in the past were not an issue to pay.

U.S. Bankruptcy Court records show us that there were 27,413 bankruptcy petitions filed in Wisconsin in 2008. More than 80% were Chapter 7 cases. Chapter 7 cases resolve medical bills, credit card balances, and other types of debt. Recent Research by The Associated Press says that more than 1.4 million bankruptcies were filed in 2009, an increase of about 32% from 2008.

Even though bankruptcy resolves the issue of looming debt and offers consumers a fresh financial start, debtors often stay unemployed and are unable to find employment to get an acceptable income again.

Even more depressing, unless the economy improves enough for industries to start hiring again, there is not much reason to think that bankruptcies will go down in 2010. Researchers have noted that home foreclosures will continue to pile up in 2010 because people who previously had adequate credit have lost employment and cannot keep up with payments.

Bankruptcy can seem like a good option to obtain a fresh start, but it has a negative effect on your credit report for ten years, leaving you unable to get a car, place of residence, or employment. Before declaring bankruptcy, it might be a wise decision to talk to your creditors anddetermine if some sort of repayment plan can be worked out.

Mallory McGuinness is employed by a debt collection agency. Also she composes stories on business and finance, consumer spending and collection agencies.