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Consumer bankruptcy for November down 12 percent from last year

According to a report from the American Bankruptcy Institute, the number of consumer bankruptcies filed in the United States last month was significantly lower than the same time last year. The American Bankruptcy Institute used data from the National Bankruptcy Research Center to compile its report.

The executive director of the Institute said that the decrease in consumer bankruptcy filings over the past year shows an improvement in the way American consumers are handling debt. By the end of the year, he predicted that there would be less than 1.4 million total consumer bankruptcy filings.

The report from the Institute states that there were 100,980 consumer bankruptcy filings in November of this year compared to 114,587 filed in November last year. That is a 12 percent decrease over the period of one year. In addition, there was a 5 percent decrease in consumer bankruptcies between October and November 2011, when there were 106,255 filings. As a category, Chapter 13 bankruptcy filings accounted for 31 percent of consumer bankruptcies in November, which the report says was a small decrease.

When consumers file bankruptcy, they commonly file under Chapter 7 or Chapter 13 of the Bankruptcy Code. Chapter 7 bankruptcy is an option for both individuals and businesses and aims to distribute the debtor's wealth to creditors fairly. Non-exempt properties are liquidated and unsecured debts that are not reaffirmed are discharged, leaving the debtor with a clean financial slate.

Chapter 13 bankruptcy gives an individual whose debt does not exceed a specified amount the chance to repay part of all of their debts to unsecured creditors over a three- to five-year period. The debtor must have a regular source of income and follow a court-approved repayment plan.

In addition to Chapter 7 and Chapter 13, there are other bankruptcy options available to debtors that are less common. Chapter 11 is commonly used by businesses, but is also available to individuals who wish to reorganize their finances through a court-approved plan. Chapter 12 is a special option available to family farmers who make their income through farming.

Source: Central Valley Business Times, "Consumer bankruptcies dropped in November," Dec. 5, 2011

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