Damn... I guess we will have to outlaw bankruptcy AGAIN!

[Kurt_and_Hunter]

We were quite shrewd in outlawing bankruptcy just in time for an economic collapse.

As the chart shows, it worked great... for a while.

Guess we will need to outlaw bankruptcy again. (sarcasm, of course.)





http://www.calculatedriskblog.com/2009/12/abi-pesonal-bankruptcy-filings-decline.html

[Hello_Kitty]

1. The thing is, most filers are qualifying for Chapter 7 these days.

Losing jobs and income leading them to fail the means test for Chapter 13.

[FBaggins]

2. The chart doesn't really show that.

It shows four quarters where the <B>fear</b> of bankruptcy being "outlawed" in the near future caused people to declare NOW rather than later. So some of those bankruptcies that would have occurred in 2006 or early 2007 shifted forward into 2005... causing a few quarters of unusually high activity followed by a few of unusually low activity.

The same thing is happening now with some of the housing incentives (and though I haven't looks, I'd bet with the cash-for-clunkers program to a lesser extent). Sales pick up when it looks like the incentive is going away (to get in under the wire), but then fall off right afterward because the people who WOULD have purchased during that period already own a car.

Just as some of these incentive-driven sales increases are artificial, some of those peak bankruptcy filings are "artificial" (in the sense that the individual could have struggled on for another year).

In this case it actually DID "work" (not that this is necessarily a good thing), because the current figure on that chart isn't anywhere NEAR as high as it "should" be given the current economy.

[Kurt_and_Hunter]

3. I agree completely... so why are we disagreeing?

The fact that bankruptcies during a massive recession are the same as during a housing boom suggests that bankruptcy is a lot less attractive or available than previously.

The joke of the OP is just that... that we are once again approaching the pre-reform levels.(Discounting the spike you correctly reference.)

[FBaggins]

4. I may have misunderstood

I thought you were saying that the spike followed by the collapse on the chart was the "success" of the "outlawing" and that the success was obviously temporary. I'd say the policy change did what it was intended to do (which isn't the same thing as saying it was a good idea).