BURLINGAME, Calif. -- Bankruptcy filings surged prior to last year's implementation of the Bankruptcy Abuse Prevention and Consumer Protection Act, but filers abruptly put the brakes on immediately after the Oct. 17, 2005 effective date.
Annualizing third quarter data, Lundquist Consulting, Inc. found that one in 170 households filed bankruptcy in 2006, as opposed to one in 53 in the third quarter of 2005. "While bankruptcy filings rates are rising, they continue to remain significantly lower than historic levels," Chris Lundquist, founder of Lundquist Consulting, said. "A significant amount of the decrease can be explained by the large volume of consumers who filed Chapter 7 in October 2005, making it still too early to understand the long-term affects of BAPCPA."
Lundquist's third quarter findings showed that bankruptcy filings are steadily rising, quarter over quarter, for the year. Third quarter 2006 filings totaled 160,198, a 12.2% increase from the second quarter and a 55.6% growth over the first quarter. The total number of filings in the one-year period since the enactment of the new law (Oct. 17, 2005 through Oct. 16, 2006) was 475,000. Filings averaged 1.4 to 1.5 million a year between 2000 and 2004.
The point of the bankruptcy reform bill was to curb filers gaming the system, a small percentage, and push more people who can repay some of their debts to do so, credit union trade groups have explained. Lundquist found that third quarter Chapter 7 filings, providing consumers with the greatest debt relief, were 77.2% lower than those in the third quarter of 2005. Chapter 13 filings, requiring consumers to repay a part of their debts, were 36.2% lower than the third quarter of the previous year. Additionally, Chapter 13 filings in the third quarter of 2006 represent 42.5% of total filings compared to 29.0% prior to the enactment of the bankruptcy reform act.
According to Lundquist, the increases were not necessarily a regional matter as all exhibited continued growth. Slowest growth occurred in the Mountain region--encompassing Arizona, Colorado, Idaho, Montana, New Mexico, Utah, and Wyoming--at a 3.2% increase. The South (West) region (Alabama, Arkansas, Louisiana, Mississippi, and Texas) encountered the greatest increase at 21.2%. The largest volume of third quarter 2006 filings occurred in Georgia at 10,740 filings, followed by California at 10,435 and Ohio at 9,722. --scooke@cutimes.com
