Bankruptcies are booming

Nearly 1.2 million debtors filed for bankruptcy in the past 12 months, according to federal court records.

Last month, 130,831 sought bankruptcy protection – an increase of 46 percent over March 2008 and 81 percent over the same month in 2007.

Bankruptcy filings could reach 1.5 million this year and level off at 1.6 million next year – around the same time economists expect an economic recovery to begin.

Congress voted in 2005 to make bankruptcy more cumbersome after years of intense lobbying from the nation’s lenders, who complained that people were abusing the system. Before the move to change the law, bankruptcies were running at what was then an all-time high of about 1.6 million per year.

The tighter requirements initially appeared to work, with bankruptcies plummeting from a record-shattering 2 million cases in 2005 – a total that reflected a rush to file before the new law took effect – to 600,000 in 2006.

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