By Vicki Needham - 11/02/10 09:54 PM EDT
Personal bankruptcies increased 1.4 percent in October but are down 2.8 percent from the same month last year.
The American Bankruptcy Institute said Tuesday that with another 132,173 consumer bankruptcies filed last month, filings are on pace to hit a five-year high, according to data from the National Bankruptcy Research Center.
So far this year, about 1.3 million bankruptcy cases have been filed, ahead of the 1.2 million through the first 10 months of 2009.
Analysts are predicting that filings could reach 1.6 million this year, the largest number since 2005, when there were 2 million filings after Congress made changes to the bankruptcy system that were aimed at making it more difficult to file.
The law was constructed to push consumers toward Chapter 13 bankruptcy, where a debtor works out a payment plan, but it's used only about 30 percent of the time. Instead, Chapter 7 is more commonly used — it forgives debt and usually requires forfeiture of assets.