August 14, 2009
July saw record number of Americans filing for personal bankruptcy in the past five years as a way to cancel debt or re-structure payments to deal with personal financial problems.
According to statistics released by the American Bankruptcy Institute (ABI), 126,434 Americans filed for bankruptcy in July, the highest monthly total since 2005, and a total of 1.4 million Americans could file for personal bankruptcy by the end of the year.
From January through June, 675,351 Americans filed for bankruptcy, a 36.5 percent rise from the same period last year.
In the United States, individuals can file for bankruptcy if they meet with severe financial problems.
"Rising unemployment on top of high pre-existing debt burdens is a formula for higher bankruptcies through the end of this year," ABI Executive Director Samuel Gerdano said in a statement.
Analysts said most people file for bankruptcy out of necessity. Of all the people that file for personal bankruptcies, nearly 40 percent of them file due to some financial crisis outside of their control. In the recent economic recession, foreclosure is the main factor.
But in many cases this financial crisis is some serious health issue. For those who do not have health insurance, a catastrophic illness such as cancer, can wipe them out financially.
Even for many people with health insurance, the combination of premiums and deductibles can put a major dent in their finances. Especially hit hard are the elderly and families where a single woman is the head of the household.
The second biggest reason that people file for bankruptcy is either the loss of a job or divorce.
Not only people from the working class have filed for personal bankruptcy. There are more cases of celebrities doing the same thing.
Movie actor Stephen Baldwin sought bankruptcy protection in July from creditors after lenders began foreclosure procedures against his home.
Lenny Dykstra filed for Chapter 11 bankruptcy in a petition that says the former Major League Baseball All-Star owes between 10 million and 50 million dollars. Dykstra's filing comes in the wake of more than 20 lawsuits he faces tied to his activities as a financial entrepreneur, including The Players Club, a glossy magazine for athletes that he launched last year.