Personal bankruptcy filings in Connecticut skyrocketed 44 percent in the third quarter compared with a year earlier as job losses and salary cuts squeezed household budgets burdened by high credit card bills, a new report showed Monday.
There were 2,569 personal bankruptcy filings in the state in the three months ending Sept. 30, compared with 1,773 for the same period in 2008, according to the report from The Warren Group.
New Haven. "It's the basic lack of income in an economic downturn."
Connecticut has lost 79,100 jobs since employment peaked in March 2008. When the state releases its September employment report today, Klepper-Smith said he expects that the state will have lost 1,500 to 2,500 additional jobs.
Many economists now believe that the state will lose closer to the high end of 80,000 to 100,000 jobs in the fallout of the recession.
And when employers do start expanding payrolls again, they will do so cautiously, so relief might not come quickly enough for many facing bankruptcy, economists say.
Many Connecticut residents "are struggling to pay their bills and have accumulated tremendous debt by relying on credit cards to pay for basic living expenses," said Timothy M. Warren, chief executive of The Warren Group.
Chapter 7 bankruptcy filings — which wipe out all but mortgage debt — totaled 2,275 in the third quarter, compared with 1,384 a year ago, a 64 percent jump.
In Connecticut and throughout the nation, Chapter 7 filings spiked in 2005 before a new federal law went into effect that made it tougher and more expensive for consumers to file for Chapter 7 protection.
Chapter 13 filings, which require a repayment plan, fell by 24 percent, to 294 in the recent quarter, from 389 in the same period in 2008.
The shift to Chapter 7 is likely an attempt by consumers to hang onto their homes, said Joel Grafstein, a bankruptcy lawyer in Farmington.
"If there's a finite amount of money coming in and people are paying the mortgage first, and the car second, there isn't a lot left over," Grafstein said. "They have a better chance of staying in their homes."
Through the first nine months of 2009, personal bankruptcies rose 22 percent, to 7,177, from 5,583 for the same period a year ago. Chapter 7 filings rose 51 percent in the period to a four-year high of 6,289, up from 4,176 in 2008.