Despite being marked as the peak of the recent "boom years", 2005 is on record as the year in which the most bankruptcies were recorded. Despite heavy job growth and a supposedly great economy, two million Americans sought financial relief from the court system. This year, it looks as if about 1.5 million people will file bankruptcy. While that number may surprise some, it is considerably lower than might be anticipated given the present economic conditions.
In 2005, new laws were passed which aimed to make it much more difficult for individuals to seek bankruptcy protection. It was sold as a way to prevent people from abusing its benefits. However, one need only look at the type of organizations behind the bill's lobbying...the credit card companies...to know that we were all being sold a bill of goods.
Arguably, the legislative actions of 2005 to "avoid the abuse", may actually have made things worse.
Before 2005, credit card companies nationwide recognized bankruptcy trends and...in pushing through the 2005 bankruptcy bill...they did all they could to prevent the numbers from continuing to climb. Never being willing to leave well enough alone, never willing to pass up on the needs of "greed", and confident with the passage of the bill that they had crippled the bankruptcy laws sufficient to make it difficult, if not impossible, for people to file bankruptcy, they timed the introduction of a series of new, aggressive strategies designed to increase profits, around the passage of the new bankruptcy bill. These strategies included and involved massive advertising campaigns to lure more people into debt, introductory interest rates that suddenly spike, new rules for service charges, and increased late fees.
Obviously, with the passage of the 2005 bankruptcy bill, the mindset of the credit card industry had to have been: "Oh boy...we have them where we want them now". Essentially, they thought...and acted as if... everything they needed to record monumental profits was in place, starting with the 2005 bankruptcy bill, a bill packaged up and delivered with a big red bow by our U.S. Congress.
Historically, bankruptcy had always carried with it the scarlet letter of financial failure. Few people sought protection simply to avoid paying bills; it was a challenging and unfortunately, socially awkward label to adhere to one's self. The truth be known...not much has changed. Not really. Most people still shrink at the thought of filing bankruptcy, regardless of what the credit industry would want you to believe. So to preach to Capitol Hill, in support of the 2005 bill, that bankruptcy laws were being abused was anything but the full truth.
Still in all, it seems, the creditors got what they wanted: less filings, at least for a period of time, a chance to put more families in debt, and a chance to keep more families in debt. It must have smelled like profit...all the way to the bank.
Oops. As it turns out, it now seems that the higher levels of debt and increased population of those in debt has done a lot more than just hurt those who carry that debt; it's load has been transferred to our entire economy. With an economy in trouble and with people losing jobs, the default rate on credit cards has soared. Now, banks making a fortune on credit card interest and penalties are all of a sudden looking face to face at a default rate high enough to portend massive losses. The bigger they are, the harder they fall. What goes around comes around. And, but for the misguided efforts to keep these banks from failing, these banks would surely suffer the full measure of what their unbridled greed deserves.
In retrospect, one could argue that if bankruptcy laws remained intact as they were before 2005, the credit card industry would have had less incentive to get more people in debt and, in turn, a lot fewer people would be contributing to the collective national economic downfall we are experiencing today.
For the present, filings continue to climb and threaten to reach new historic highs, in no small part due to our Congress blind to a credit card industry allowed to run rampant over, use and abuse our population.
The lack of available credit is not helping and only goes to show how bad things really are. Without more avenues by which to re-finance, move debt around or consolidate loans, once considered by most as financially savvy methods of dealing with debt...if handled properly..., many of your options and alternatives have disappeared completely...arguably leaving you with only 3 options, and 3 options only: Don't pay, file bankruptcy or die.
For most people, not being able to pay is no option and dying is unthinkable; explaining why more and more folks are turning to their only viable option remaining, bankruptcy.
The month of May saw 6,020 new bankruptcy cases each day. In April, the number was 5,854. Now, with a continuing tide of commercial bankruptcies, personal filings may see another surge before the end of the year. To no surprise, Michigan's auto industry failures have driven the rate to new levels and Nevada's housing crisis is also responsible for a high number of bankruptcies.
Despite all the stats and figures and trends, this news may not be all bad. In the long run, for the majority of those filing bankruptcy, the lessons learned and chance to start anew can only contribute to a healthier overall national economy.
And hopefully, one of the big lessons from all this will be that regulation is a good thing. Continuing to let greedy credit card companies victimize our population and put themselves and our overall economy at serious risk is simply unacceptable.
Need to explore bankruptcy as an solution? In North Carolina, keep the Law Offices of John T. Orcutt in mind. Offering services in 28 counties of North Carolina out of 4 offices located in Raleigh, Durham, Wilson and Fayetteville, we offer a totally FREE and confidential consultation. During normal business hours, just call toll free to +1-888-234-4190, or visit our website at www.billsbills.com.