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Bankruptcies continue to climb, though debt management plan may provide an alternative
By Peggy Stillwell on Mar 5th, 2010
Troubled Americans continued to turn to bankruptcy in February, despite the negative effect it can have on a person's credit score.
According to the American Bankruptcy Institute, the number of consumer bankruptcies during the second month of 2010 increased 14 percent when compared to February of last year.
In all, 111,693 consumer bankruptcies were filed in February 2010, the ABI reported. The numbers were based on findings by the National Bankruptcy Research Center.
"Consumer filings this year will likely surpass 1.5 million filings, or the same number of annual filings averaged in the years leading up to the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005," said Samuel Gerdano, executive director of the ABI.
The act made it more difficult for consumers to file for Chapter 7 bankruptcy protection, which eliminates a variety of debts. Instead, many consumers may have to file for Chapter 13 bankruptcy, which sets up a repayment plan.
Regardless of the type of bankruptcy, consumers can expect their credit history to be affected for 10 years. Rather than turn to bankruptcy, some people may consider other options, such as a debt management plan.
Such a plan may help consumers pay off their debt by reducing the amount of interest they end up paying.
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