WASHINGTON — Even though bankruptcy filings were down year-over-year as of Sept. 30, September filings were the highest in the last 12 months.
Bankruptcy cases filed in federal courts totaled 801,269 for the 12-month period ending Sept. 30, which was down 28% from 1,112,542 filings at the same time last year, according to the Administrative Office of the U.S. Courts. However, September represented the highest number of filings since September 2006 and the quarter ending Sept. 30 saw a 28% jump in filings.
Bankruptcy filings fell dramatically last year after the implementation of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. Bankruptcy filings have been on the rise throughout fiscal year 2007 (Oct. 1, 2006 through Sept. 30, 2007) though they remain relatively low.
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Personal bankruptcy filings totaled 775,344 in September compared to the 1,085,209 at the same time last year. Business filings were down 5%, or 25,925, from September 2006.
The bankruptcy reform legislation, solidly backed by the credit union trade associations, purported to push more debtors who could repay a portion of their debts to do so. This aim appears to have been borne out as Chapter 7 filings, wiping out all debts, declined in FY 2007 while Chapter 13 filings, which restructure debts, increased. Chapter 7 filings totaled 484,162, down 42% from the 833,147 in FY 2006. Over the same period, Chapter 13 filings climbed 14%, from 272,937 in FY 2006 to 310,802 in FY 2006.
"We're seeing increased numbers," NAFCU Director of Legislative Affairs Brad Thaler acknowledged. "There's some indication–this is me putting on my economist hat–there's some indication that could be from what's happening in the mortgage market…One of our concerns with 3609 [Emergency Home Ownership and Mortgage Equity Protection Act of 2007] is if you open up Chapter 13 to mortgages that you could really see that number spike up [and]…could really have a detrimental effect on financial institutions such as credit unions."
CUNA Vice President of Communications Pat Keefe agreed pointing out that, according to the administrative office, Chapter 13 can save homeowners from foreclosure.
Chapter 11 business reorganizations and Chapter 12 family farm filings also fell over the 12-month period.
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