According to the article, bankruptcy filings in the year 2010 have reached the highest level since 2005 when the congress had overhauled the bankruptcy system (Murray, 2010). The law was amended to make sure that debtors did not walk away with debts by being allowed to create a payment plan to payback the debts. In 2010, the National Bankruptcy Institute reported that 132,173 consumer bankruptcies were filed in october (Murray, 2010). This was a 1.4 % increase as compared to the number of bankruptcies filed in September 2010. Around 1.3 million personal bankruptcies have been filed in the year 2010 (Murray, 2010).
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Experts have projected that the number of bankruptcy filings in the year 2010 could reach 1.6 Million (Murray, 2010). Chapter 13 allows the debtor to develop a plan to repay his/her debt however chapter 7 provides that the consumer debts be forgiven whereas assets could be forfeited. In October 2010 less than 30% of bankruptcies filed qualified for the conditions in chapter 13 (Murray 2010). The increase in the bankruptcies filed can be attributed to the recent global recession that resulted in massive job losses. Paying debts through the provisions set up in chapter 13 is not possible for households without income. Therefore around 70% of the debts filed in 2010 may not be payable because most of the debtors will be forgiven
The above statistics clearly show that the recent global financial crisis had far reaching consequences. The increase in level of bankruptcies filed show that the same trend could go on in the year 2011. According to the statistics provided households that did not have a means of income accounted for 70% of the bankruptcies filed. Therefore the global recession is largely responsible for the increase in personal bankruptcy levels.
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