Bankruptcy Filings on the Rise (Surprise, Surprise)
Bankruptcy filing statistics for the first quarter of 2007 have finally been released by the Administrative Office of the U.S. Courts and-presumably to no one's surprise-personal bankruptcy filings climbed more than 66% during that period.
Filings plummeted after the October, 2005 bankruptcy reform took effect, but expert opinion varied on the reasons for the decline. While the banking and consumer credit industries were optimistic, many economists and those involved in the consumer bankruptcy process pointed out that there were a number of unusual factors that might impact filings.
For instance, a huge rush of filings in the weeks leading up to the effective date of the new bankruptcy law meant that many people who might otherwise have hung on longer and filed later had already done so. And, of course, the dramatic press surrounding the law change convinced may prospective bankruptcy petitioners that they were no longer eligible to file.
The new law, however, did nothing to assist consumers in financial crisis or improve the economic factors leading to bankruptcy, so many believed it inevitable that filings would begin to climb again. Quarterly filings for the first three months of 2007 are still quite a bit lower than average quarterly filings before the law change: The first quarter of 2005 ended with just over 400,000 filings, while the same period in 2007 closed out at 193,641.
Still, those quarterly numbers have been climbing steadily since the first quarter of 2006:
- Q1, 2006: 116,771
- Q2, 2006: 155,833
- Q3, 2006: 171,146
- Q4, 2006: 177,599
- Q1, 2007: 193,641
With no relief in sight for consumers facing mounting transportation costs, record numbers of mortgage foreclosure actions, and mass layoffs heavily concentrated in the building and transportation equipment industries, all indications are that the numbers will continue to climb. The only real difference, as consumer bankruptcy attorneys across the country have long predicted, is that consumers already facing financial crisis and all of the associated stresses and expenses will have to pay more fees and jump through more hoops to get to the same place.