According to a story by the Associated Press, bankruptcies in the Southern District of Indiana are up 70% from last year. It’s not as bad as it sounds, however. 2006 filings were artificially low because of the law change in 2005. In 2005, the bankruptcy law became harsher, so folks who would have ordinarily waited until 2006 went ahead and filed before the laws changed in 2005. Still, indications are that bankruptcies are climbing up to their old levels. I don’t think the harsher laws actually did much to reduce bankruptcies. The law was intended to at least get more people into Chapter 13 bankruptcies (where they pay into a plan for 3 to 5 years) rather than into Chapter 7 bankruptcies (where their assets, if any, are divided up, sold off, and distributed.) I’m not sure it’s even doing that.
I think the bankruptcy act has merely increased the bureaucracy of filing bankruptcies and increased the fees charged by bankruptcy attorneys. I would be surprised if the data showed that creditors are getting much if any more of their money back. As a collection attorney, my experience has been that people don’t file bankruptcy in marginal cases. If they can get back from the brink, they usually try to do so. Bankruptcy filers are, by and large, in a hole they’ll never get out of on their own, no matter how diligent they are. They get in that hole for a variety of reasons. Some folks have simply been irresponsible. But, in addition, a lot of people just get buried by medical bills. They didn’t go out and buy a big screen TV. They just got sick.
Reform health care, and I think you’ll see a lot fewer bankruptcies.
Don’t tell Senator Bayh that. I’m sure they’re all just a bunch of wasteful overspenders in his eyes…
I used to work for a bankruptcy lawyer, and I can basically back up everything you’ve claimed here. I’ve seen families who are living in campers, or crammed four-to-a-room in a grudging relative’s house, etc. It’s heartbreaking.
And I expected, when I started working there, to see a lot more irresponsible credit-card types. Really, though, those I’ve helped to file were mostly the elderly on fixed incomes, or those who have had the misfortune to get hurt or sick and get buried by medical bills. (REFORM HEALTHCARE indeed; it’s heartbreaking!)
The third-largest group is the woefully uneducated who, honestly, really could benefit from the online “financial responsibility” course that all filers are now required to take. So, in addition to my agreement with you that healthcare reform is a total must, I add that pre-emptive education is also a must.
Also, while attorney fees went up in both 7 and 13, the increase was much tougher for the 13’s. How’s THAT supposed to encourage people to file 13 instead of 7 when they’re already sunk? All it led to in the office I worked for, is that several people whose paperwork we couldn’t get processed by the ’05 deadline had to convert from a 13 to a 7 because they couldn’t handle the increased fees.