The number of Americans filing for bankruptcy soared 23 per cent last month as homeowners fought to prevent their homes from being repossessed.

According to the American Bankruptcy Institute, around 69,000 people applied for two types of bankruptcy, one of which protects homeowners from being evicted from their homes if they can present a feasible plan to keep on top of their debt repayments and have a regular income.

The Institute, a national non-profit research group whose members include bankruptcy attorneys, judges and lenders, said that more homeowners had applied for bankruptcy in states where the property slump was more severe.

The figures reveal the impact of the housing recession in America, which marks the worst real estate slowdown for 16 years. They also raise pressure on the US Federal Reserve Bank to cut rates again when it meets next week. In September, the Fed reduced the cost of borrowing by a half percentage point to avert a deepening credit crisis in the US. It is expected that Ben Bernanke, chairman of the Fed, will cut rates again before Christmas.

Over a nine month period, the number of personal bankruptcies rose almost 45 per cent compared with the same period last year.

Traditionally, most borrowers who filed for bankruptcy, did so under under Chapter 7 of the federal Bankruptcy Code. Under that provision, debtors have to give up certain assets, often a chunk of equity in their homes. Those assets are sold to pay off borrowings. Typically, while the measure stops the foreclosure process, it just buys a borrower time, and most lose their home.

However, according to The Institute, an increasing number of Americans are opting for bankruptcy under Chapter 13, where a homeowner is often given three to five years to stick to an agreed repayment plan and keep their homes.

Court papers in Washington show that the number of personal bankruptcies under Chapter 13 doubled in California during the second quarter of the year, rose by 40 per cent in Ilinois and 70 per cent in Massachusetts.

There are rising concerns that the blight affecting American property prices will travel across the Atlantic to Britain. Only last week, the International Monetary Fund warned that Britain was vulnerable to an American-style property slowdown, as it argued that homes in the UK were overpriced by 40 per cent.

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