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BURLINGAME, Calif.-Though 2005 saw a record-shattering number of bankruptcy filings, the number has dropped dramatically since the law was enacted. According to Chris Lundquist, president of Lundquist Consulting Inc., the number of personal bankruptcy filings are down significantly since the Bankruptcy Abuse Prevention and Consumer Protection Act went into effect Oct. 17, particularly the Chapter 7 filings. The total number of filings following the enactment of the legislation through Dec. 31 was just over 38,000, less than 2.0% of all 2005 filings. Over the years, the number of Chapter 13 filings, where repayment plans are worked out, have accounted for about 30% of total filings, according to Lundquist. Since the new law became effective, Chapter 13s now total about 60% of filings. The main objective of bankruptcy reform proponents was to steer filers away from Chapter 7, where a petitioner’s debts are wiped clean. However, these numbers are not necessarily telling of the law’s success; right now, everyone is still trying to figure out the new law, Lundquist explained. He added that his firm is not tracking lender savings due to bankruptcy reform. However, he remarked, “The new bankruptcy law didn’t just change the financial situation of consumers. At the end of the day, they might not bankrupt but they’re in no better position financially overall.” When asked whether the law would actually achieve its supporters’ goals, Lundquist said, “I only think time will tell.The means test is geared for that.” By the middle to the end of 2006, the results of the change in the law should be clearer, he said. The overall number of bankruptcy filings is down so far in 2006. He said that debtors are filing just over 1,000 petitions a day whereas in 2004 and early 2005, fillings were between 6,000 and 7,000 a day. “It will take some time for the full effect to take its course. We have no indication that they will go all they way back up,” Lundquist said. Lundquist Consulting did not have any industry-specific data available. Prior to bankruptcy reform, Lundquist said, “We did predict that 2005 would be down” from the previous year’s bankruptcy petitions. Bankruptcy filings skyrocketed just over two million last year-a record-up from 1.55 million filings in 2004, or 31.6%, Lundquist information stated. October 2005 alone saw 650,000 filings. According to the Administrative Office of the U.S. Courts, 2003 bankruptcy filings stood at 1.66 million, greater than the 2004 figure. Lundquist Consulting extrapolated from the over two million filings in 2005 that one in every 53 households, based on U.S. Census estimates for 2005, filed for bankruptcy protection. Chapter 7 filings, which the new law was intended to curb, shot up by nearly half before the new law took effect, and Chapter 13 filings were down 7.9%. “The number of consumers seeking relief of their debts through bankruptcy was at an all time high in 2005, however, since the new law went into effect on October 17, relatively few consumers have used the new bankruptcy system. We are now seeing bankruptcy levels slowly on the rise as the industry learns the new bankruptcy law,” Lundquist observed. Regional Data Bankruptcy filings were up significantly across the nation, according to Lundquist Consulting. The smallest growth was across the South (East) at 17.6%. He said he expects an up tick in the area due to hurricane-related filings but not for some time. “Typically, it takes one to two years after financial disaster to see someone in bankruptcy,” Lundquist explained. “We are monitoring that. We haven’t seen anything to date.Obviously that could have an impact.” The North Central (East) had the highest increase at 43.2%, primarily driven by Ohio, which experienced a 51.7% increase last year. Vermont, however, was the state that experienced the largest jump in bankruptcy filings at more than 58%. The bankruptcy data specialist said he is just beginning to look at the factors in play to cause the regional situations. -

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