Public likely to pay for rising personal bankruptcies

By year-end, though, Shelbourn said he's all but certain to file for Chapter 7 bankruptcy protection.

He told me he's struggling to crawl out from under about $150,000 in student loans, $25,000 in credit card debt and $20,000 in medical bills, not to mention a pile of late fees that have accumulated because of missed payments.

"If I had to pay it all back, I'd find a way," Shelbourn said. "But I feel like I'm at a turning point in my life. I want a clean slate. I want to start over."

Like a lot of people, he's nervous about the economy sliding into a prolonged recession and the effect this could have on his job, his health insurance and his ability to survive. Shelbourn said he decided to seek bankruptcy protection before things got worse.

It's a decision many people have made in recent weeks. Consumer bank- ruptcy filings rose 28.6% nationwide last month from a year before,according to the American Bankruptcy Institute.

In August, bankruptcy filings were up 29.2% from a year earlier.

"The continued rise in personal bankruptcies reflects high consumer debt, made worse by energy costs and the weak housing market, trapping many households in homes they can neither afford nor sell," said Samuel Gerdano, the institute's executive director. "We expect consumer bankruptcies to exceed 1.1 million new cases by year-end."

If he's right, that would handily top the 822,590 bankruptcies recorded last year and would be the highest level since 2005, when Congress passed legislation intended to reform the bankruptcy process and make it harder for people to escape their debts.

American consumers owe nearly $2.6 trillion in non-mortgage debt, or about $8,460 for every man, woman and child, according to the Federal Reserve. Credit card debt alone is fast approaching $1 trillion.

Henry Sommer, president of the National Assn. of Consumer Bankruptcy Attorneys, said these are boom times for people in his line of work. Many bankruptcy-related law firms are working full tilt and rapidly bringing on additional staff.

"There's a lot of business," he said. "This is a growth area."