Consumer Bankruptcies Soar in October

U.S. consumer bankruptcy filings soared 40 percent in October as home values sank and individual debts ballooned, the American Bankruptcy Institute (ABI) said Tuesday.

U.S. consumers filed some 106,266 bankruptcies in October, up 40 percent from a year ago and up 20 percent from September.

So far this year, consumers have filed more than 880,000 bankruptcy petitions, eclipsing 822,000, the total for all of last year, the ABI said.

"October's sharp spike in new consumer bankruptcies confirms the severe financial stress on household budgets caused by high debts, flat incomes, and declining home values," ABI Executive Director Samuel Gerdano said in a statement. "We expect the 2008 numbers to be the highest since the new bankruptcy law went into effect in 2005."

This is the first time that individual filings have topped 100,000 in a month since the U.S. Bankruptcy Abuse Prevention and Consumer Protection Act took effect.

The law makes it more difficult for an individual to file for Chapter 7 bankruptcy protection that allows most debts to be forgiven. Under the law, individuals must undergo a review to determine whether they have enough income to pay some portion of their debts.

The ABI used data from the National Bankruptcy Research Center in its report.