A New Horizon Credit Counseling Reports Bankruptcies Fall in 2011

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Debt avoidance and declining eligible petitioners cited

Less than 1.37 million bankruptcies were filed in 2011 representing an 11.9% drop in new bankruptcy petitions for all fifty states and the District of Columbia compared to 2010. The statistic comes from data provided by Epiq Systems and signals a significant change in direction for this form of debtor relief. Bankruptcies surged in 2005 in advance of a new bankruptcy law which made it more difficult for debtors to seek protection. In 2005 nearly two million individuals filed for bankruptcy. A New Horizon Credit Counseling Services is a nonprofit debt management organization that has been helping consumers since 1978.

Steven Stark, COO of A New Horizon Credit Counseling Services, said, “The reason for the decline can be attributed to more responsible borrowing following the recession, a smaller pool of debtors that qualify for the more stringent criteria to file, and more consumers seeking credit counseling.” A New Horizon offers credit counseling and a structured debt management plan as an alternative to bankruptcy.

Bankruptcy is favored by insolvent debtors as a way to get a new start, free of oppressive financial obligations, and in many cases as a means to save the family home. High unemployment, huge numbers of home foreclosures and mortgages balances that are in excess of the market price of the family home provide little incentive for debtors to file for bankruptcy.

States with the highest mortgage foreclosure rates, highest unemployment numbers and largest number of debtors seeking protection in bankruptcy during the last few years saw the largest decline in bankruptcy during 2011. Nevada had a 19% decline, Florida a 16% drop, and California a 8% reduction.

Stark said, “Another factor that has depressed the number of bankruptcy filings is that student loans, which at $845 billion according to a Federal Reserve Bank of New York report, exceeds credit card debt, the mainstay of bankruptcy petitions, and is not dischargeable in bankruptcy.”

2012 may bring a new increase in filings however. At the end of 2011, the Federal Reserve reported that credit card spending spiked nearly 9% to a total of $798.3 billion in November, perhaps providing a new pool of debtors seeking protection in the future.

For more information about their programs, contact 1-800-556-1548. They can also be found on the web at http://www.anewhorizon.org, or reached via email at csmanager(at)anewhorizon(dot)org.

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