From the Boston Herald
By Thomas Grillo
Thursday, October 15, 2009
The number of Bay State residents filing for Chapter 7 bankruptcy protection increased 35 percent in the first three quarters of 2009 compared to a year ago, according to a report released this morning by The Warren Group.
“A growing number of people are being forced into bankruptcy because job losses and salary cuts have made it difficult for them to pay their bills. Some have relied on credit cards to pay for even basic living expenses and now are seeking protection under bankruptcy law as a last resort,” said Timothy Warren, CEO of The Warren Group in a statement.
Chapter 7 bankruptcy filing is the most common option for individuals who are seeking relief from their debts and accounted for 82 percent of bankruptcy filings tracked by The Warren Group in Massachusetts during the third quarter of 2009. People seeking Chapter 7 bankruptcy protection can eliminate most debt after non-exempt assets are used to pay off creditors.
There were 11,872 Chapter 7 bankruptcy filings in Massachusetts from January through September, up from 8,777 during the same months in 2008 and almost double the 6,229 filings during the same period in 2007.
Third quarter Chapter 7 filings totaled 4,098, a 34 percent increase from 3,055 in the third quarter of 2008, but 8.7 percent lower than the second quarter’s 4,489 filings.
While there has been a significant increase in the number of Chapter 7 bankruptcy filings this year compared to the prior three years, the number of filings is below the level in the first three quarters of 2005.
Filings soared in 2005 shortly before a federal law went into effect that made it tougher and more expensive for consumers to file for Chapter 7 bankruptcy protection. The law requires debtors to file under Chapter 13 if their income exceeds the median income in their state. While Chapter 7 essentially wipes away debt, Chapter 13 requires debtors to arrange for a three- or five-year debt repayment plan.
Chapter 13 bankruptcy filings in Massachusetts dropped 23 percent to 2,463 in the first three quarters of 2009 from 3,216 in the first three quarters of 2008, The Warren Group reported. There were 869 Chapter 13 filings in the third quarter, down 7.2 percent from 936 in the third quarter of 2008 and 5.4 percent fewer than the 919 filings in the second quarter of 2009.