Bankruptcies Up 32% in 2009

[laughingliberal]

RALEIGH, N.C. — U.S. consumers and businesses are filing for bankruptcy at a pace that made 2009 the seventh-worst year on record, with more than 1.4 million petitions submitted, an Associated Press tally showed Monday.

The AP gathered data from the nation's 90 bankruptcy districts and found 1.43 million filings, an increase of 32 percent from 2008. There were 116,000 recorded bankruptcies in December, up 22 percent from the same month a year before. <snip>

<snip> John Pottow, a bankruptcy professor at the University of Michigan, said the return to the highs of earlier this decade illustrates the failures of the 2005 overhaul bill. He said the measure largely made filings more costly and time-consuming by forcing consumers to undergo a paperwork-heavy test to determine eligibility for Chapter 7 bankruptcy and adding liability for attorneys who provide help.

"It never made sense in the first place that you could change the laws and make all these bankruptcies go away," said Pottow, who would like to see the 2005 law changes repealed. "If people are encountering financial distress, you can only scare them away for so long before they come back again." <snip>

http://www.huffingtonpost.com/2010/01/04/bankruptcies-surge-32-per_n_410824.html


The changes to the bankruptcy laws slowed bankruptcies for a while but they are now on their way to returning to pre 2005 levels. 2005 saw 1.6 million bankruptcies. The number for 2009 is 1.4 million. The laws the industry had put in place to make discharge of debt more difficult are kind of moot now. The 2005 laws attempted to force people into chapter 13 where they would still have to repay some of the debt. But those of limited income (below the median for their state) were still able to file chapter 7 and fully discharge the debt. With unemployment where it is most of those filing now likely are eligible to file chapter 7.

edited to add link. doh!

[laughingliberal]

1. I like the poetic justice aspect of this story

The industry lobbied to have a law passed that would keep consumers from escaping debt. The law required people above certain income levels to file chapter 13 and pay back some of the debt. Then, the banking and financial industry helped tank the economy which resulted in many people now falling below the income levels where they are required to pay back part of the debt. As sad as it is that many people are in such dire straits (and I'm one of them), it is pure justice that, at least in this regard, their best laid plans have backfired.