The number of Americans filing for personal bankruptcy protection plunged 69% in the second quarter after a federal law made it harder for borrowers to erase their debt, according to figures released Thursday.
A separate report showed that the number of U.S. workers filing first-time applications for state jobless benefits rose last week because of temporary shutdowns at some auto factories and a partial closure of government services in New Jersey.
Bankruptcy filings fell to 142,815 from 458,991 a year earlier, according to Lundquist Consulting, a Burlingame, Calif.-based firm that collects data from U.S. Bankruptcy Courts. The figure was 39% higher than the first-quarter total.
Bankruptcy figures for the last year have been skewed because many Americans rushed to file before the Oct. 17 law change took effect. Last year's bankruptcies ran about 800,000 more than the five-year average, denting profits for banks, including New York-based Citigroup Inc. and JPMorgan Chase & Co. This year's figure is about 450,000 below average.
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, supported by credit card issuers and signed by President Bush in April 2005, prevents debtors from filing for Chapter 7 bankruptcy protection if they earn more than their state's median income and can repay at least $6,000 of debt over five years.
Separately, initial jobless claims rose by 19,000 to 332,000 in the week that ended Saturday, the Labor Department said. The four-week average of claims, a less volatile measure, rose to 317,250 from 308,500.
Jobless claims figures are distorted in the period when automakers close plants to install machinery for the coming model year, a Labor Department spokesman said.
Excluding such temporary factors, claims are drifting higher as the economy cools, economists said.