When Congress enacted the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), it made its intentions clear. Lawmakers and lobbyists set out to decrease the total number of filings and force more debtors into Chapter 13 repayment plans instead of Chapter 7 debt liquidation. For a while, decreased filings turned out as planned, but now the numbers are trickling up again.
Impact of bankruptcy law changes
The changes in the bankruptcy laws that took effect on Oct. 17th last year put a huge curb on bankruptcy filings in the fourth quarter of last year. According to LexisNexis U.S., filings dropped by 91 percent in November 2005 and 87 percent in December 2005, compared to the same months in 2004. Additionally, Chapter 13 filings exceeded Chapter 7 filings, as the Chapter 13 numbers totaled 24,656, surpassing Chapter 7 filings by 1,988. While supporters argued that the statistics demonstrate the success of the legislation, most tout that the immediate effect of the law was probably so drastic due to the surge in bankruptcy filings just before the new law went into effect.
Many of the attorneys at Legal Helpers have found that a number of misconceptions exist amongst the public about the new law. The misconceptions may have contributed to some of the decline in filings. Many people who contact us think they cannot file bankruptcy any more, or that they can no longer eliminate credit card debt. Some think they earn too much for any bankruptcy relief or that they cannot file because of the assets they have. Many debtors come to these incorrect conclusions without consulting with practicing bankruptcy attorneys.
The need for Bankruptcy has not changed
Most bankruptcy attorneys are not surprised to see a slow rise in bankruptcies now that the flood of cases from last year has passed. The problems that led people to file bankruptcy in the past are still present. Job loss, medical problems, and divorce continue to force people into considering bankruptcy. Henry Sommer, Esq., co-editor-in-chief, of Collier on Bankruptcy, says this decline was expected. "It's not a surprise to me personal bankruptcies are on the rise again….Think about it - doubling of minimum credit card payments; higher interest rates; energy costs; and questions about whether the housing bubble can be sustained - all contribute to financial disaster for American families."
Debtors are slowly getting the word that they can indeed qualify for bankruptcy relief. In March 2006, Chapter 7 filings rose to 31,615, compared to 19,481 Chapter 13 filings. So already the Chapter 7 debt liquidation has surpassed the Chapter 13 repayment plans in numbers of filings. Chapter 7s amounted to 60% of the total number of personal bankruptcy filings. These numbers are twice the January 2006 statistics when a lesser 25,005 filings were counted.
All indicators show that the bankruptcy volume is on its return to normalcy. Debtors are learning that bankruptcy help is still available.
Conclusion
Are you one of the many that suffer from insurmountable debt and thought bankruptcy was no longer an option? Give us a call at 888.743.5787 or fill out our free legal evaluation form. The evaluation is free, no obligations are attached.
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