In a recent article published on Reuters.com, Jonathan Stempel points out what has become obvious to many lawyers with full case loads and courts with backlogs: bankruptcies are still on the rise.
This is an uphill battle with a lot of problems, including high unemployment rates, the mortgage bust, and millions of Americans lacking in proper medical coverage.
According to government data, the U.S. bankruptcy filings have reached the highest point since 2005. The Reuters article points out how clearly unemployment is part of the problem. But it is more than that. With over 1 million filing bankruptcy in 2009, it would not have been wrong to see that as a watershed moment.
However, instead of improving, the economy is struggling. Consumer bankruptcies have not just gone up: since the calendar year as of June, we are looking at over 20% increase in filings.
Quarterly filings between April and June, cited in the Reuters piece, note how the problem is still less serious than the economic slump of 2005. In 2005, in one quarter over 600,000 consumers filed for bankruptcy.
Of note is that this is the year that new bankruptcy code made it more difficult to file for Chapter 7 bankruptcy.
According to the bankruptcy code changes of 2005, if you make more than the median income of your state, which can vary from $30,000 to about $50,000 per year for individuals, you are not eligible for Chapter 7 bankruptcy.
On the other hand, pushing consumers to file Chapter 13 not only encouraged financial responsibility but opened the door for less foreclosures to occur. If used correctly, a Chapter 13 bankruptcy can be more effective in protecting your home.
Because of the changes, filings for Chapter 13 increased. Whether this had a clear affect on the foreclosure rates may not be obvious. What we do know is that bankruptcies have once again increased. In the quarter of April to June, over 400,000 bankruptcies were filed, the first time the limit has gone that high since 2005.
This does not mean growth isn’t coming, nor does it mean filing bankruptcy is a bad idea. This news does mean there is a lot of work to be done.
If you are unsure of whether bankruptcy is right for you, it’s time to consult with a lawyer. If you’re scared you’ll lose your home, it’s best to act now. And if you have a huge debt over your head, understanding how the laws work can be invaluable.