Understanding Bankruptcy Filings
There was a time when there were few bankruptcy filings. Last year, there was a record low in consumer bankruptcy cases as a result of tougher bankruptcy laws passed in 2006, but that simply seemed like a fluke as this year sees a growing resurgence in bankruptcy filings. Today, bankruptcy courts witness an average of 2,000 new filings a day according to the originator of Lundquist Consulting, Chris Lundquist, which studies bankruptcy trends. This is four times the numbers that were filed two years ago. Lundquist also added that at this rate, there would be almost 1 million bankruptcy filings at year's end.
The problems and complications that new bankruptcy laws have created has made bankruptcy filings a virtual nightmare for everyone concerned. Since bankruptcy filers are obligated to go through credit counseling before they can carry on with their cases, there has been a virtual inundation of filers at credit counselor's offices, straining both time and finances. Some bankruptcy filers come to the counseling with even no money to pay the small counseling fee. With every pre-bankruptcy counseling session costing $50.96, filers can sometimes just eke out 1/3 of that amount. The agencies criticize that the unusual deluge of filers has compelled them to divert resources to bankrupts that could otherwise be utilized to aid consumers who have a great chance to pay off debts.
The main criticism leveled against the new bankruptcy laws is that lawmakers were to short-sighted in diverting bankruptcy filings into Chapter 13 plans for repayment, instead of a Chapter 7 liquidation of debts. This critics say, was prejudicial to consumers while putting a number of restrictions on more irresponsible lenders. The reform law with its non-negotiable implementation deadline also forced consumers to put in their application just to beat the date even if under normal circumstances, they would not have filed for another year or so. The resulting rush and panic saw October 17 with flooded bankruptcy courthouses with over 2 million consumer cases filed in 2005 alone.
The questions now asked this year include, would more people discouraged from filing bankruptcy? Will there be really more Chapter 13 filings instead of under Chapter 7? Some factors should be considered in getting a more accurate picture of rising bankruptcy filings: 1. Bankruptcy filings will be spurred as there is indication that lenders seem to be more inclined than ever to extend or expand credit even to consumers with questionable credit payment backgrounds. According to an industry source, the current credit card debt stands at a whopping %700 billion. 2. Bankruptcy filings will be spurred by the continuing inability of a lot of consumers to have a good grasp of proper financial concepts. In short, bankruptcies will be caused by a simple lack of sensible common sense. 3. Bankruptcy filings will be spurred by credit card interest rates with no caps. It is always a good idea to check on your penalty rates which might go through the roof with one single missed payment. 4. Bankruptcy filings prompted by people who find themselves in a situation where they would need insurance, but do not have any.
| 