BURLINGAME, Calif. -- The national credit union trade associations lobbied hard for the Bankruptcy Abuse Prevention and Consumer Protection Act that they say targets debtors trying to game the system, and after nearly a decade of work got their wish at the end of 2005.
The new law became effective Oct. 17, 2005. Running up to that date, bankruptcy filings skyrocketed to a record of just over two million in 2005--up from 1.55 million filings in 2004, or 31.6%, according to Lundquist Consulting. October 2005 alone saw 650,000 filings.
But filings slowed abruptly after October, Lundquist data showed, with just one in 170 households filing bankruptcy in 2006, based on annualized third quarter data; at the same point in 2005, that figure was one in 53.
However, Lundquist's third quarter findings showed bankruptcy filings 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) is 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 pushing 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 13s in the third quarter of 2006 represented 42.5% of total filings compared to 29.0% prior to the enactment of the bankruptcy reform act. --firstname.lastname@example.org