Bankruptcy Filings Up 35%--What This Means for You
Data on bankruptcy filings are out for the third quarter of the fiscal year 2007, and filings are continuing what the federal judiciary's website is calling a "slow upward creep." Specifically, the total number of filings (including both business and personal) in the third quarter has increased 35% since last year.
There's a lot of information out there, and some of it can be misleading and difficult to sort out. Basically, here's what some statistics really mean:
- "Bankruptcy filings are down 49.4% compared to the 12-month period ending in June, 2006." Because of the enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) in October, 2005, there was a rush to file for bankruptcy before the law took effect. Many people feared they would not qualify for bankruptcy after the new restrictions were imposed, and so many more people than normal rushed to file before October. The numbers for June, 2006 include filings from July, 2005-June, 2006, and so include the October surge.
- So the stats for the 12-month period ending in June, 2006 are higher than this year's because there was a lull just after the law took effect. So many people had rushed to file that few were left to do so in the first months after BAPCPA.
- "Bankruptcy filings are up 35% compared to third-quarter filings in the 2006 fiscal year." Again, this makes sense when the surge caused by BAPCPA is taken into account. In early 2006 (the third quarter of the fiscal year), the effects of the filing surge in 2005 were still lingering. Many people who would have been filing then had already done so to assure they would qualify. This year, there was no "rush period" to file, so bankruptcy filings for each quarter have been steadier.
- "Bankruptcy filings continue to reflect a slow upward creep." This is a crucial piece of information, because it indicates the overall trend of bankruptcy filing as the unnatural highs and lows caused by the BAPCPA surge wear off.
It turns out, even though many people were worried about not qualifying for bankruptcy after BAPCPA took effect, most people who would have filed before were still eligible after. So, as new people find a need to file bankruptcy, the numbers begin to reflect more of a "normal" filing load.
The "upward creep" can be seen when you compare the data from just after the filing surge (when numbers were very low) until now, as filings are continuing to level out and return to levels comparable to those of pre-BAPCPA days.
In short, the increase in bankruptcy filings doesn't seem to be too troubling, when taken in perspective. If you are uncertain about how these data may affect you, or if you would like more detailed information about your eligibility to file for bankruptcy, you may want to talk to a bankruptcy lawyer in your area.