Personal Bankruptcy Filings Fall, But That's Nothing to Cheer About

Personal Bankruptcy Filings Fall, But That's Nothing to Cheer About In the current cloudy economy, finance experts and everyday folks are constantly hunting through the news and statistics for silver linings. So it would surely seem a good thing that in the first nine months of this year, personal bankruptcy filings decreased 10% compared to a year earlier, according to the American Bankruptcy Institute -- but experts say hold the applause.

While we might want to take some comfort in the fact that bankruptcies declined from last year -- which had the highest number of filings since 2005 -- truth is, it's not necessarily good news.

"People file bankruptcy because of financial distress," explains David Leibowitz, co-chair of the Consumer Bankruptcy Committee of the ABI. "They are afraid of losing their houses, getting their wages garnished or losing their personal property. If the personal property is exempt, as is often the case for people who have little in the way of assets, if they no longer own their own home as is more and more frequently the case, if the home has no equity, which is very often the case, or if they are unemployed, then people who owe money for credit cards, medical bills and the like are said to be judgment-proof. There's no need for them to file bankruptcy."

Then too, once you file a bankruptcy case, you can't file again under Chapter 7 for eight years. With well over 10 million bankruptcy cases in the past eight years, that's a lot of people who are ineligible to file again, says Leibowitz.

"The fact is, bankruptcy cases continue to be filed at high levels. This is reflective of the very poor economy and does not necessarily reflect a leading economic indicator of better times to come," says Leibowitz.

A Range of Economically Unhealthy Explanations


Something else could be going on too. Creditors are working with consumers more than they ever have in an effort to just collect something. "I see a lot of people at all income levels that are a paying a fixed monthly payment on credit cards which they negotiated better rates with the credit card companies," says Julie Murphy Casserly, president of JMC Wealth Management.

Also, she says, consumers are able to easily walk away from bad home purchases though short sales or foreclosures, either of which can shore up their financial position a lot. And thanks to the sheer volume of home loans in default, homeowners are able to skip paying their mortgages for 18 to 24 months before a bank gets around to kicking them out.

David McClough, assistant professor of economics at Ohio Northern University, certainly sees nothing in the numbers to cheer about either. "Consider, for example, how the financial crisis, recession, housing crisis, and jobless recovery undoubtedly moved forward many bankruptcies that would have been delayed," he says. "In this case, the decline implies that more people declared bankruptcy sooner and thus have struggled with the consequences longer. This is not a good thing."

The 2005 Bankruptcy Act, made it more difficult for individuals to file personal bankruptcy and see a full discharge of their debts. Consequently, many who file will have to pay some of their debts over time. That means filing bankruptcy is no longer the golden parachute it once was.

"This could discourage the greater number of filers," points out Jeffrey Verdon, a tax and estate planning attorney with the Jeffrey M. Verdon Law Group. He has another suspicion: "The extension of unemployment benefits may have had an affect on the number of those who file for personal bankruptcy."

Others suggest the dip may be temporary. "As foreclosure filings again reach lofty levels, the bankruptcy filings will again spike as people file to slow down the foreclosure sale," predicts Ted Connolly, a bankruptcy lawyer with Duane Morris and author of Road Out of Debt.

Simply put, there are better tea leaves for reading the economy than the bankruptcy numbers. "Mortgage foreclosures and depressed real estate values continue to be a drag on the economy," says the ABI's Leibowitz. "The best indicator of better times to come is the level of unemployment, which remains persistently high. Interestingly, temporary employment is increasing. This might be a leading indicator of better times to come."

Connolly, keeping it real, says: "The decrease in filings is too insignificant to portend an improving economy. Instead, the filing numbers continue to show a weak economy, teetering on the brink of a downward fall."


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Sky Fairlane

Regarding unemployment and debt:

If you’re unemployed or under employed, chances are you are not going to be able to pay your way. People are

getting arrested for their unpaid debts in six states. And collection agencies are behind it. A petition has been

started on moveon.org to prevent the return of debtor’s prison in the USA. Once enough signatures are obtained,

it will go to the US Congress and President Obama.

To sign the petition go to

http://signon.org/sign/outlaw-the-return-of

February 13 2012 at 2:10 PM Report abuse rate up rate down Reply
robbertoreyzman

it is very clear that the power is coming back to the people.
most small businesses comes from collapse of a huge ones.
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October 11 2011 at 8:57 AM Report abuse rate up rate down Reply
robbertoreyzman

it is very clear that the power is coming back to the people.
most small businesses comes from collapse of a huge ones.
this gives lots of new opportunities for those who left behind in this bubble era,and good things always comes from great difficulties like the all in free software tsunami that got released to capture this exact opportunities.
one that i like to tell you about is soho os,its a free management platform for your small business its free easy to use for the untrained person and very effective .
it takes your everyday vendors,links,leads,suppliers,invoices etc,and put it all in order.
and its all for free!,for me it was life changer,i could not afford accountant to mange my growing business but now i can do it myself with soho os platform,fast accurate and easy
self managing is the future of small business and soho os is the best platform (for me)
check it out in www.sohoos.com hope it helped.

October 11 2011 at 8:52 AM Report abuse rate up rate down Reply
Hytjtj

My best friend ,she just has announced her wedding with a millionaire old man Ronald who is the CEO of a MNC ! They met via ----SeekSugarDad.CОM---.- ..it is the largest and best club for rich man date with young and beautiful woman and their admirers to chat online. …you don’t have to be rich there ,but you may meet one ,maybe you wanna check it out or tell your friends !
In 2006 I tried desperately to work with the banks regarding my credit card debts. Not one bank, Bank of America, CitiBank, American Express was willing to work out any kind of payment arrangement, so I was forced to file Chapter 7. If they would have given me the opportunity to just pay off the principal and not add on any more interst, I would have been able to pay them all off long before now. They wound up with zero and now I have 8 yrs to restore my credit. .Banks suck big time

October 08 2011 at 3:14 AM Report abuse +1 rate up rate down Reply
koldaseyce

In 2006 I tried desperately to work with the banks regarding my credit card debts. Not one bank, Bank of America, CitiBank, American Express was willing to work out any kind of payment arrangement, so I was forced to file Chapter 7. If they would have given me the opportunity to just pay off the principal and not add on any more interst, I would have been able to pay them all off long before now. They wound up with zero and now I have 8 yrs to restore my credit. .Banks suck big time

October 06 2011 at 2:40 PM Report abuse rate up rate down Reply
1 reply to koldaseyce's comment
gblank1603

They suck because you failed to pay then what you owed--go figure.

October 06 2011 at 3:14 PM Report abuse +1 rate up rate down Reply
Stephen

If you examine the differences between the bankruptcy law before 2005 and after 2005 you would have to conclude that the lawmakers ABSOLUTELY kew what was comming.They made the changes that were necessary to keep most people from filing chapter 7, if they had not done this the whole system could have easily collapsed under a flood of chapter 7 filings

October 06 2011 at 1:52 PM Report abuse +1 rate up rate down Reply
nocstreet

My 56 year old sister worked 10 years for a company that went by-by overseas. 1400 people out of work. The employment dept was over whelmed. There were very few jobs available in her field within 110 miles. She went back to school to hopefully start a new career. By the time she got out in 1 and half years most job markets dried up where she lived. Even part time minimum wage jobs were going to youger people.
She had her house foreclosed on, couldn't pay her credit cards, no health insurance. She was sick from an abcessed tooth, and was so depressed she couldn't even ask for food stamps. She actually thought she didn't qualilfy. She had sold her few pieces of jewlry for $50 to buy food. I hadn't heard from her in months. No phone service. All her utilities were turned off for several week. This is how I found my sister. She lives with me now. I paid the $1335 for her to file bankrupsy. I paid for her continued medical care. I have to pay probably more than $2000 to get her teeth fixed so she will look good enough for someone to hire. I have other family members and friends and friends of friends that are in the same boat. We need jobs. I'm 69 and still working 26 hours a week to stretch the social security my husband and I get. We have never been able to save for retirement. Social Security is it for us. But what to do when everyone else is hurting worse then you.

October 06 2011 at 12:36 PM Report abuse +1 rate up rate down Reply
krazzicraig

For any that find themself unable to pay their their bills . The first thing you want to do is go to your local legal office. make sure you speak to a lawyer . The next time you recieve a call from a bill collector ,give them the lawyers name and phone number. At that point hang-up if they call back , you can file a claim . By law they can not speak with you once they have been told you have a lawyer.This will not clear up the debt , but it will stop the phone calls.If they do call again , get their name and address . Then hang -up. Send them a registered letter stating you intend to file a law suit . They will back-off

October 06 2011 at 10:05 AM Report abuse rate up rate down Reply
1 reply to krazzicraig's comment
Darren

and how would you obtain a lawyer if you dont have $ for one?

October 06 2011 at 10:11 AM Report abuse rate up rate down Reply
1 reply to Darren's comment
georgettec28

Hiring a lawyer when you don't have money is the catch 22. Most attorneys will accept a deposit (about $500) and allow you to call them your bankruptcy attorney. As such, you can give out the attorneys name and phone number to your creditors. In the meantime, save your money for the balance of the bill which will run somewhere between $1500 and $2500, at least in the northeast. No lawyer will file your bankruptcy papers unless you have paid your attorneys bill in full. They are not stupid.

October 06 2011 at 11:30 AM Report abuse rate up rate down
tombecbee

YOU KNOW, IF McCAIN HAD BEEN ELECTED, PEOPLE WOULD BE JUST AS DOWN ON HIM. AS THE YEARS
HAVE GONE BY, CHINA IS MAKING MORE AND MORE OF THE WEALTHY CORPORATIONS PRODUCTS .

EXAMPLE--MERCURY OUTBOARD MOTORS--AND MANY OTHER MARINE PRODUCTS PUT IN BOATS. I WORKED
FOR THE LARGEST --BRUNSWICK CORP. THEY OWN 30 BOAT COMPANIES. ANYTHING THEY CAN CLONE
LIKE SEATS WAS THE LAST THNG I SAW THEM HAVE MADE IN CHINA.

JUST ONE EXAMPLE---THESE JOBS MAKING THEM IN THE US IS OVER...PERIOD---NEVER COMING BACK
BUT GUESS WHAT----YOUR GOING TO BUY PRODUCTS MADE IN CHINA , KNOWING IT OR NOT....

October 06 2011 at 9:34 AM Report abuse +1 rate up rate down Reply
bmiller616

Have you ever had the creditors call you? It's like the devil comes on your phone.. They are horrible and liars at best...The way these creditors are talking to people, yelling at people, lying to people about what they need to do, it's a horrible thing and how these people can do that job is beyond me... They are really different in nature... BK is the only way to go. Why? You have about two years before the banks are calling you to give you credit. You go for credit without BK and you get refused. You go for credit after BK and you get a higher interest rate... They are more apt to give you credit after the BK then if nothing... And I don;t know where you got your numbers, but they are way off...

October 06 2011 at 9:08 AM Report abuse rate up rate down Reply
1 reply to bmiller616's comment
jbumonkey

that's why you get rid of your landline, which you do not need and coasts you antoher 50+ bucks every month, and use a product like kaspersky on your smart cell phone, to put all their phone numbers on a black list so they cannot call you. that way you have some peace to re-organize and start to pay down some of that debt.....so they won't call you eventually.

October 06 2011 at 9:36 AM Report abuse +1 rate up rate down Reply