Bankruptcy Filings Soar Due To New Law

[jeffrey]

With the new bankruptcy law approved and only 6 months before it takes affect, those in debt are heading for the courthouse in droves. Last month, when the new bankruptcy law was still not official, but passage looked inevitable, a record 165,000 people filed for bankruptcy during March.

The huge numbers are likely to continue for the next few months as those in debt opt to file for bankruptcy while it's easier and less expensive rather than wait until after the new law goes into effect on October 17th. For those that are on the edge, the new law and more difficult qualifying terms for Chapter 7 bankruptcy have convinced many to file for bankruptcy earlier.




The 165,000 March bankruptcy filings compares to 152,000 bankruptcy filings in March 2004 and is an 8.5% increase. The increase reverses a steady decline in bankruptcy filings over the last two years. In 2004, bankruptcy filings declined about 4% while in January 2005, they declined 13% and in February a whopping 17% year over year.

[Susapalooza]

While I don't want to see bankruptcy filings abused as an "extension" of credit, a huge proportion of bankruptcy is generated by those confronted with untenable medical fees. CNN's "Lou Dobbs Tonight" featured a story about a woman who had no health insurance during a three-day window between jobs. During those 72 hours, her son had a seizure. The ensuing medical bills amounted to $30,000+. She was forced to declare bankruptcy.

Although the economy would benefit from a tighter reign on bankruptcy, I believe judges should weigh the merits of each case individually.