In 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act was passed, according to the lending industry, to curb the serial filings of perceived "bankruptcy abusers". The Act's passage gave rise to the bankruptcy means test, time limitations between filings and higher filing fees. It also complicated the petition process, making the hiring of an experienced attorney a necessity.
As a result of the Act, heavily lobbied by the credit industry and its lobbyists, bankruptcies declined quickly. The year prior to the Act's passing, there were 6,339 bankruptcy petitions filed during a typical business day. In 2006, the number sharply decreased to 2,372 per day. This year, as America struggles to cope with an economic downturn some say is surpassed by only The Great Depression, personal bankruptcy filings have bounced back to almost 5,600 per day.
The quick jump in the last 18 months demonstrates the severity of the financial morass in which we are all wallowing. The American Bankruptcy Institute (ABI), a 12,000-member organization that provides non-partisan research and education on financial insolvency for professionals, the government and the public, cites that in many areas of the country, per-capita bankruptcy rates have tripled since 2007. More to the point, the ABI's research shows that bankruptcy remains a last resort for the majority of those who file and that it is not something people tread into lightly.
A professor of law at the Illinois College of Law and a national expert on bankruptcy, supports the ABI's findings, stating, "... bankruptcy is not really the problem. It's a symptom." The ABI predicts that by the end of 2009, 1.4 million people will have filed bankruptcy.
Lawless also points out that bankruptcies lag behind market conditions. In other words, the filings today represent conditions from the fall of 2008 and winter of 2009. As unemployment continues to climb and the financial setbacks refuse to ease this summer, bankruptcy courts will remain busy throughout 2010. Needless to say, Mr. Lawless is not optimistic about the immediate economic future of the country.
The 2005 act is still having an impact, however, as many experts agree that had it not been passed, today's bankruptcy filings would be above that of the modern annual record of 2,000,000 established in 2005 just before the act became law. It should be noted that the years leading up that record were not the most productive for the United States either, providing additional indication that today's bankruptcy filings are not solely rooted in irresponsible spending and too much credit.
If you're feeling the effects of the current recession, bankruptcy can help safeguard your family's financial future. Call a bankruptcy attorney today. In North Carolina, call 1-888-234-4181 to set up a free initial debt consultation.