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U.S. bankruptcy filings down for 2012

Massachusetts residents may be happy to know that the number of Americans filing for bankruptcy for their homes or businesses fell significantly in 2012. In 2011, 1.38 million people filed for bankruptcy protection throughout the United States. In 2012, 1.13 million individuals sought debt relief through consumer bankruptcy.

Business bankruptcy filings fell more sharply than personal bankruptcies, declining by 22 percent.

Experts predict that the number of filings will continue to decrease in 2013. Experts attribute this to low interest rates and a change in attitude toward debt since the 2008 financial crunch.

Compared to last decade, the number of bankruptcy filings since 2010 have been relatively low. Prior to a bankruptcy overhaul in 2005, which in many respects tightened restrictions on people seeking to eliminate debt through bankruptcy, Americans filed an average of 1.5 million bankruptcies a year.

To many in Massachusetts, a decrease in bankruptcy filings is a welcome sign that the economy is recovering and fewer households are facing financial hardship. However, the number of bankruptcies that are being filed suggest that many still need the fresh start and financial relief a bankruptcy can provide to families.

One of the biggest advantages an individual bankruptcy offers is that it is an effective tool for eliminating what bankruptcy attorneys call "unsecured debt." Unsecured debt includes items like medical bills and many small business debts, as well as most credit card debt.

Even when a family attempts to manage their debt effectively, a sudden change in circumstances, like a job loss, a small business failure or unexpected medical bills, can leave people facing serious financial difficulties that are best handled via a Chapter 7 or Chapter 13 bankruptcy.

Source: Rueters, "U.S. bankruptcy filings drip 14 pct in 2012," Jan. 4, 2013

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