Posted on Tuesday, 19th January 2010 by debtpreventions
Consumers filing for bankruptcy protection peaked in 2005, in anticipation of tougher regulations enacted under the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA). Those regulations made it more difficult for consumers to discharge all debts and, instead, forced more people into debt payment programs – commonly a Chapter 13 bankruptcy.
Consumer Bankruptcy Filings
| Year | 1st Q | 2nd Q | 3rd Q | 4th Q | Total |
| 2005 | 393,086 | 458,597 | 532,526 | 654,633 | 2,039,214 |
| 2006 | 112,685 | 150,975 | 165,862 | 177,599 | 617,660 |
| 2007 | 187,361 | 203,744 | 211,742 | 218,428 | 822,590 |
| 2008 | 236,982 | 266,767 | 280,787 | 288,436 | 1,074,225 |
| 2009 | 330,477* | 381,073* | 388,485* | n/a | Est. 1.4m |
Source: American Bankruptcy Institute
*Data includes U.S. Territories
After the sharp drop from 2005’s record highs, totals have risen steadily. By the end of 2008, filings again exceeded one million per year. Because consumers have less control over repayment terms under the new regulations, those terms can be challenging for many people living paycheck to paycheck. As many as two-thirds of borrowers are unable to complete the terms of a Chapter 13 bankruptcy program and have to exit it. However, most borrowers are able to discharge their debts by converting to a Chapter 7 liquidation bankruptcy.
In 2009, the total filings reached 1.4 million, soaring 32% from the previous year – making it the highest since the passing of the BAPCPA. The most recent data available (November 2009) show that Chapter 7 filings were up 42% compared with the same period a year earlier. Chapter 13 filings rose by 12% and made up less than a third of 2009 filings as of November.
The surge can be attributed to foreclosures and unemployment. For those reasons, most borrowers now qualified for Chapter 7 bankruptcy and could walk away from their debts without entering into a Chapter 13 repayment program plan. The new bankruptcy law was intended to prevent consumers from discharging debts in such ways. This is not what Congress had in mind with the BAPCPA.
Tags: Bankruptcy, Consumer
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