Bankruptcy

Personal Bankruptcy Filings Climb in 2010

By guest-writer

The latest figures on personal bankruptcy filings in the U.S. have been released and it looks like 2010 will see the most bankruptcy cases since 2005, when the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) took effect.

Here?s a refresher course on what BAPCPA did for filings in 2005 and what the latest numbers might mean.

How the ?New? Bankruptcy Law Affected Filing Figures

• New law announced: When news came down that BAPCPA would be signed into law, some consumers were afraid that the law?s provisions would make qualifying for bankruptcy protection much more difficult in the future.
• A rush to file: Fearing that they would not be eligible for bankruptcy protection once BAPCPA regulations were on the books, many consumers filed for bankruptcy immediately before the new law took effect, meaning that filing figures for 2005 were exceptionally high.
• A drop-off in filings: Because so many people filed before the new law took effect (perhaps earlier than they would have filed under normal circumstances), bankruptcy filings in the months following the implementation of BAPCPA dropped significantly. This caused BAPCPA supporters to claim the law had ?worked? by decreasing bankruptcy filings.
• A steady climb in filings: But, within two years of the laws going into effect, the U.S. economy was thrown into turmoil and millions of Americans have found themselves without work and in danger of losing their homes. Bankruptcy filing numbers have climbed since the initial decline, and 2010?s figures are no exception.

The Latest in Personal Bankruptcy Filings

This year, according to government figures, bankruptcy filings will reach about 1.5 million in 2010, the same annual level as the first half of the last decade. These numbers suggest that what the overall impact BAPCPA had on the number of bankruptcy filings was minimal:

• More hurdles, same need: Though the new bankruptcy law made it more difficult (and more expensive) to file for bankruptcy, it seems that the added ?hurdles? have not deterred those in financial distress from getting the protection they need, as some feared.
• Little ?abuse? to prevent: One bankruptcy myth that spurred the passage of BAPCPA was that a significant number of bankruptcy filings were abusive and/or fraudulent ? that is, that people were abusing the bankruptcy system to get out of debts they could otherwise pay, or had no intention of paying when they first took them on. In fact, most studies show that a mere two percent of pre-BAPCPA bankruptcy filings could be considered ?abusive;? that the total number of yearly filings hasn?t changed much since the new law took effect seems to support those findings.
• If you need financial help, bankruptcy is an option: Finally, it?s important to note that people who honestly need the financial relief bankruptcy provides are, by and large, still able to qualify for that protection. To learn more about whether bankruptcy might be right for you, simply contact a lawyer practicing in your area.

Full post as published by The Bankruptcy Blog on November 15, 2010 (boomark / email).