Bankruptcy filings rise 38% in U.S. in 2007

Bankruptcy filings by American consumers and businesses soared 38% in 2007 to a total of 850,912, the Administrative Office of the U.S. Courts said Tuesday.

Some legal experts have said they expect an even steeper rise in 2008 bankruptcies because of the sub-prime mortgage crisis that is forcing growing numbers of homeowners into foreclosure.

In 2006, there were 617,660 bankruptcy filings, said the agency that compiles data from courts across the U.S.

The vast majority of the 2007 filings -- 822,590 of them -- involved individuals. Business bankruptcy cases also rose, jumping 44% to 28,322 filings, the court office said.

The all-time high occurred in 2005 with more than 2 million bankruptcy filings just before the federal bankruptcy law was reformed to make it more difficult for consumers to discharge their debt under Chapter 7 of the law. The reforms also increased debt payments required under Chapter 13 filings and eliminated some protections such as delaying housing evictions or delaying child support proceedings.

Some Democrats in Congress are pushing for another change in the federal bankruptcy law to help stop the rising number of foreclosures. The legislation, which is opposed by Republicans and the banking industry, would allow bankruptcy judges to reduce mortgage amounts to reflect the current fair value of a home in Chapter 13 proceedings.