Consumer bankruptcies surged 41% last month relative to the year before as home values continued to fall, according to the American Bankruptcy Institute. The number of bankruptcy filings also outpaced the August level of 4% – by a factor of 10. Nearly 125,000 people filed for bankruptcy protection in September 2009, the fourth-highest since a major change in the bankruptcy law was enacted in 2005.
With the first four quarters of the year behind us, there have been 1.05 million consumer bankruptcies filed so far this year, making 2009 the worst year on record since 2005. Four years ago, 1.35 million filings occurred in the first nine months. The ABI forecasts 1.4 million filings by the end of this year.
The higher bankruptcy filing rate is due in large part to the elevated unemployment rate in the United States, which reached 9.8% last month. Unemployment has reached a 26-year high. Also, credit reporting agency Equifax reported that mortgage delinquencies accelerated in August, reaching record levels.
Signs of stabilization in the housing market thus may have been premature, and unemployment isn’t expected to peak until early next year, when a 10.3% rate is expected.