The Darien Times

Personal bankruptcy filings down 14% in Connecticut in 2011

Written by The Darien Times
Monday, February 20, 2012 09:23 AM

Chapter 7 is the most common option for individuals who are seeking relief from their debts, and accounted for 89% of bankruptcy filings in Connecticut in 2011.

In the fourth quarter of last year, 1,795 filers statewide sought bankruptcy protection under Chapter 7, compared to 2,348 in the fourth quarter of 2010. The fourth quarter saw the slowest quarterly bankruptcy pace of 2011 — representing 21% of the annual total.

"I'm encouraged by the drop in bankruptcy filings," said Timothy M. Warren Jr., CEO of the Warren Group. "It indicates that consumers are more optimistic about their ability to pay off debt and clean up their financial situations. The decrease in bankruptcy filings is running parallel with lower unemployment rates in Connecticut.

"Unfortunately," Warren continued, "I haven't seen a big enough improvement in the employment picture to confidently say the economy has completely turned the corner."

Chapter 13 and Chapter 11 filings

People filing under Chapter 7 bankruptcy can eliminate most debt after non-exempt assets are used to pay off creditors. In contrast, Chapter 13 requires debtors to arrange for a three- or five-year debt-repayment plan.

Chapter 13 bankruptcy filings in Connecticut decreased 14% to 934 in 2011, from 1,087 in 2010.

Chapter 11 filings, which are used for business bankruptcies and restructuring, also declined slightly last year in the state. Filings dropped 9% to 119, down from 131 in 2010.

A total of 9,571 filers statewide sought protection under Chapter 7, Chapter 13 and Chapter 11 of the U.S. bankruptcy code in 2011, down from 11,105 in 2010.

Bankruptcy definitions

Chapter 7: This form of bankruptcy, sometimes called a straight bankruptcy, is a liquidation proceeding. The debtor turns over all non-exempt property to the bankruptcy trustee, who then converts it to cash for distribution to the creditors. The debtor receives a discharge of all dischargeable debts usually within four months. In the vast majority of cases the debtor has no assets that he would lose, so Chapter 7 will give that person a relatively quick "fresh start."

Chapter 13: This form of bankruptcy also is known as a reorganization bankruptcy. Chapter 13 bankruptcy is filed by individuals who want to pay off their debts over a period of three to five years. This type of bankruptcy appeals to individuals who have non-exempt property that they want to keep. It also is only an option for individuals who have predictable income and whose income is sufficient to pay their reasonable expenses with some amount left over to pay off their debts.

Chapter 11: This form of bankruptcy is typically used for business bankruptcies and restructuring. It is not commonly used by individual consumers since it is far more complex and expensive to pursue. It allows businesses to reorganize themselves, giving them an opportunity to restructure debt and get out from under certain burdensome leases and contracts. Typically a business is allowed to continue to operate while it is in Chapter 11, although it does so under the supervision of the U.S. Bankruptcy Court and its appointees.

About the Warren Group

The Warren Group, based in Boston, is the publisher of Banker & Tradesman, The Commercial Record and related business publications. The company offers a range of real estate products and services for professionals and consumers searching for real estate and financial information. Learn more at thewarrengroup.com.

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