Topics
Recent Updates
September 01, 2010
TAKE STEPS TO PROTECT YOURSELF PART TWO
August 27, 2010
TAKE STEPS TO PROTECT YOURSELF
August 25, 2010
HOW GOES THE HOUSING RECOVERY
August 23, 2010
DEATH GRIP OF DEBT
August 19, 2010
HOME EQUITY LOANS BECOMING UNCOLLECTIBLE
BANKRUPTCY FILINGS UP 32 PERCENT IN 2009
Posted by: Darrell Castle
January 05, 2010
Topic: Bankruptcy
From the Wall Street Journal of Tuesday January 5, 2010 we learn that bankruptcy filings were up by nearly a third in 2009. Significantly, Chapter 7 filings were much higher. That is very significant because the 2005 changes to the bankruptcy laws were designed to force people to choose chapter 13 repayment plans over chapter 7 discharge. This is obviously being driven by the declining economy and the resultant increase in unemployment and the decline in residential housing values. Chapter 7 filings were up 42 percent through November 2009 and chapter 13 filings were up 12 percent. Chapter 13 filings made up less than a third of 2009 filings.
This all taken together indicates that the 2005 bankruptcy law changes have been a failure according to Ronald Mann, a law professor at Columbia University. The Post reported that professor Mann stated, "I don't think anybody who's knowledgeable about the bankruptcy system thought the statute was well crafted."
The demographics of Bankruptcy also seem to be changing. The Institute for Financial Literacy reports that more people with high income and high education levels are resorting to bankruptcy than ever. My response is that rather than say these people are "resorting" to bankruptcy why not report accurately and say that they are left with no option other than bankruptcy after losing their jobs and homes. Expenses that were reasonable and affordable when fully employed become unsustainable with job loss.
The one third increase in bankruptcy filings reflect the declining American economy but they mean much more than that. They mean that Americans are not optimistic about the future. People cannot meet their debt service obligations without full employment and very few expect a return to full employment in the immediate future.
