The Warren Group reports an increase in bankruptcy filings in 2010 compared to 2009 in Massachusetts and Connecticut, which ultimately reflect the region's unstable economic welfare and dissolves hopes for a fast path towards recovery.
Chapter 7, or personal bankruptcy, filings in Connecticut rose over 14% to 9,887 in 2010, up from 8,641 in 2009. In Massachusetts filings jumped almost 9% compared to 2009 reaching a total of 17,496 up from 16,118 in 2009, a 45% hike from 12,034 in 2008.
The Boston-based group finds that Chapter 7 of the U.S. bankruptcy code is the most common option for individuals seeking debt relief. And since bankruptcy is “a last resort,” these increases illustrate how consumers are stuck with the debt they've accrued over the years and have no choice but to turn to bankruptcy to pay it off.
While filers can choose between Chapter 7, 11 and 13, Chapter 7 is a favorite because filers can eliminate most debt after nonexempt assets are used to pay off creditors. In contrast, Chapter 13 requires debtors to arrange for a three- or five-year debt-repayment plan and Chapter 11 filings are designed for business bankruptcies and restructuring.
And while Chapter 13 and Chapter 11 filings declined slightly compared to 2009 in both states, consistently the highest number of filings was for Chapter 7.
In Massachusetts Chapter 7 bankruptcy filings accounted for 75% of all bankruptcy filings in 2010.
Chapter 7 bankruptcy filings also accounted for almost 75% of all filings tracked by the group in the fourth quarter in Massachusetts totaling 4,008 down 4.8% from 4,212 during the same period in 2009.
In Connecticut Chapter 7 bankruptcy filings accounted for more than 90% of all filings tracked in the fourth quarter.
At about 10,000 in 2010 Chapter 7 bankruptcy filings reached the highest number recorded in Connecticut since 2005, when there were 13,259 filings. Chapter 7 accounted for 89% of bankruptcy filings in Connecticut in 2010.