Chapter 7 bankruptcy filings rise by 35 percent in Massachusetts

A recent report from The Warren Group, a provider of economic and real estate data in New England, shows that Chapter 7 bankruptcy filings rose by 35 percent in the first three quarters of 2009 compared to the same time period in 2008.

From January through September of 2009, Chapter 7 filings in Massachusetts totaled 11,872. During the same period a year ago, there were only 8,777 filings.

This 35 percent increase represents the highest rate of people filing Chapter 7 bankruptcy since 2005, when the new bankruptcy laws were enacted.

According to Timothy M. Warren, Jr., CEO of the Warren Group, “a growing number of people are being forced into bankruptcy because job losses and salary cuts have made it difficult for them to pay their bills. Some have relied on credit cards to pay for even basic living expenses and now are seeking protection under bankruptcy law as a last resort.”

Chapter 7 filings rose despite a recent 23.4 percent drop in Chapter 13 bankruptcy filings. According to The Boston Globe “the shift is an indication those people who do file for bankruptcy may be deeper in debt or have less income to repay their bills.”

In fact, total bankruptcy filings – including businesses – have declined. The eight percent drop this past quarter is the first decrease in filings in the state in several years.

Warren told the Globe that fewer total filings may be a signal that some people have hope that the economy is turning around. This optimism may prompt them to try and hold on without bankruptcy for a little longer.

There is some concrete good news out of Massachusetts, too. The state experienced a decrease in foreclosure as, according to Warren, banks and mortgage lenders back off troubled home owners because of trial loan modifications and new foreclosure-protection laws.