Connecticut residents accelerated the pace at which they chose bankruptcy court to reorganize or liquidate debts in the third quarter, pushing filings so far to the highest level in four years, according to data from The Warren Group.
There were 6,289 Chapter 7 filings in Connecticut from January through September, up 50.6 percent from 4,176 during the first nine months in 2008 and more than double the 2,480 filings during the same period in 2007, the Boston information services firm said today.
The number of Chapter 7 filings in the first three quarters shot up to the highest level for that nine-month period since 2005.
“The dramatic increase in bankruptcy filings shows what effect job losses and salary cuts have had on Connecticut residents,” said CEO Timothy M. Warren Jr. “Many are struggling to pay their bills and have accumulated tremendous debt by relying on credit cards to pay for basic living expenses.”
Third quarter Chapter 7 bankruptcy filings totaled 2,275, a 64.4 percent jump from 1,384 during the third quarter in 2008. There were 54 fewer filings from the previous quarter’s 2,329 filings.
A Chapter 7 bankruptcy filing is the most common option for individuals who are seeking relief from their debts and accounted for 87 percent of bankruptcy filings tracked by The Warren Group in Connecticut 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. Even though 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 spiked 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 filings fell 36.9 percent to 888 in the first three quarters of 2009 from 1,407 in the first three quarters of 2008, according to The Warren Group. There were 294 Chapter 13 filings in the third quarter, down 24.4 percent from 389 during the same period last year and 4.8 percent lower than the 309 filings in the previous quarter.
