Bankruptcy Questions Answered

Many Thriving after Bankruptcy

A recent article in the Wall Street Journal offers an interesting look at how a variety of American bankruptcy filers are doing in their post-bankruptcy lives. The findings are interesting and informative – and, if you’re among those who have filed for bankruptcy protection in recent years, they may save you some time and worry.

Here’s a look at some of the highlights of life after bankruptcy these days.

• Credit checks & the job hunt: It seems that some people recovering from bankruptcy are finding that the job application process has an added difficulty: the credit check. While some states have made pre-employment credit checks illegal and the government prohibits public-sector employers from denying jobs on the basis of a bankruptcy filing, many private-sector companies are still running credit checks on applicants – and many apparently frown at bankruptcy filings.
• Finding new housing after bankruptcy and foreclosure: Another hurdle many bankruptcy filers and foreclosure http://www.totalbankruptcy.com/chapter-13/stop-mortgage-foreclosure.aspx victims are reportedly facing is finding a place to live after their finances fall apart. While sources note that most people with bankruptcy and/or foreclosure in their past will have to work harder to find housing than someone with cleaner credit, it seems that many landlords are willing to take into account the circumstances surrounding a bankruptcy filing or foreclosure. In other words, if you were a victim of unexpected illness, injury or job loss (like so many bankruptcy filers), you stand a better chance of securing a new lease.
• High auto loan interest rates: Many people have reportedly had great difficulty getting an affordable auto loan after a bankruptcy filing, especially in the current economy. Some people apparently choose to find housing close to their children’s schools and near public transportation; others managed to get high-interest loans on used vehicles and stay current.

General Tips for Life after Bankruptcy

The good news about recovering from bankruptcy in the current economy is that you are by no means alone, which means that more people are beginning to understand that bankruptcy provides, in some cases, the only viable option for people in financial distress.

Here are some general post-bankruptcy tips:

• Make & keep a budget: Mindfulness is perhaps the most important part of staying within your means – it’s far too easy to overspend if you don’t know how much money you’ve got at your disposal.
• Change your habits: Falling into your pre-bankruptcy financial habits will probably lead you back down the road to bankruptcy. So avoid payday lenders, pay off your credit cards each month and use cash if you can’t resist the urge to splurge on credit.
• Make a cushion: Saving money is key to making sure another financial catastrophe doesn’t undo you again. Even a small emergency fund can mean the difference between disaster and stability.

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Personal Bankruptcy Filings Climb in 2010

The latest figures on personal bankruptcy filings in the U.S. have been released and it looks like 2010 will see the most bankruptcy cases since 2005, when the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) took effect.

Here’s a refresher course on what BAPCPA did for filings in 2005 and what the latest numbers might mean.

How the “New” Bankruptcy Law Affected Filing Figures

• New law announced: When news came down that BAPCPA would be signed into law, some consumers were afraid that the law’s provisions would make qualifying for bankruptcy protection much more difficult in the future.
• A rush to file: Fearing that they would not be eligible for bankruptcy protection once BAPCPA regulations were on the books, many consumers filed for bankruptcy immediately before the new law took effect, meaning that filing figures for 2005 were exceptionally high.
• A drop-off in filings: Because so many people filed before the new law took effect (perhaps earlier than they would have filed under normal circumstances), bankruptcy filings in the months following the implementation of BAPCPA dropped significantly. This caused BAPCPA supporters to claim the law had “worked” by decreasing bankruptcy filings.
• A steady climb in filings: But, within two years of the laws going into effect, the U.S. economy was thrown into turmoil and millions of Americans have found themselves without work and in danger of losing their homes. Bankruptcy filing numbers have climbed since the initial decline, and 2010’s figures are no exception.

The Latest in Personal Bankruptcy Filings

This year, according to government figures, bankruptcy filings will reach about 1.5 million in 2010, the same annual level as the first half of the last decade. These numbers suggest that what the overall impact BAPCPA had on the number of bankruptcy filings was minimal:

• More hurdles, same need: Though the new bankruptcy law made it more difficult (and more expensive) to file for bankruptcy, it seems that the added “hurdles” have not deterred those in financial distress from getting the protection they need, as some feared.
• Little “abuse” to prevent: One bankruptcy myth that spurred the passage of BAPCPA was that a significant number of bankruptcy filings were abusive and/or fraudulent – that is, that people were abusing the bankruptcy system to get out of debts they could otherwise pay, or had no intention of paying when they first took them on. In fact, most studies show that a mere two percent of pre-BAPCPA bankruptcy filings could be considered “abusive;” that the total number of yearly filings hasn’t changed much since the new law took effect seems to support those findings.
• If you need financial help, bankruptcy is an option: Finally, it’s important to note that people who honestly need the financial relief bankruptcy provides are, by and large, still able to qualify for that protection. To learn more about whether bankruptcy might be right for you, simply contact a lawyer practicing in your area.

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Consumer Bankruptcy Filings Reach Five-Year High

According to a research by the American Bankruptcy Institute, consumer bankruptcy filings for the first half of 2010 were considerably higher than any six-month period since 2005.

The Wall Street Journal recently highlighted some of the key findings of the Institute’s study:

• Raw figures: During the first six months of 2010, consumer bankruptcy filings rose to 770, 117, which represents a 14 percent increase over filings made in the same period last year.
• Rise despite legislation: This figure for 2010 represents the highest number of bankruptcy filings since the Bankruptcy Abuse Prevention and Consumer Act was passed five years ago.
• More to come: The American Bankruptcy Institute anticipates at least 1.6 million bankruptcy filings before the end of the year.
• Debt in the desert: Sources indicate that the average national filing rate was 6,800 filings per million households. Nevada had more than double the national filing rate, coming in at 15,000 filings per million households. A partial explanation for this high figure is that Nevada also has the highest unemployment rate in the country.
• Bucking the trend: Places as diverse as Washington, D.C., Alaska, and South Carolina had the lowest filing rates, each falling below 40 percent of the national average.

While the last six months as a whole showed rising bankruptcy filings, there are also contradictory signs that bankruptcy filings may be on the decline.

In June, bankruptcy filings totaled 127,000, which is a seven percent drop from the number of filings in May. Moreover, total filings dropped in June for the third consecutive month.

Of course, this could be a blip in the large scheme of things, according to the National Bankruptcy Center. While June filings were down from this May, they still represented an 8 percent increase in filings compared to June of 2009.

What Caused the Rise in Filings?

According to Bloomberg Businessweek, the rise in bankruptcy filings is largely attributable to the combination of rising consumer debt and low savings rates.

As consumers spend more and save less, the potential for crippling debt rises significantly. Moreover, if consumers do start spending less, this may have a negative impact on investments in business, another key factor in economic recovery.

Poor consumer spending habits are further exacerbated by the shaky employment situation. Sources indicate that the employment rate was further affected by the loss of 225,000 temporary workers who had helped conduct the 2010 census.

Additional Resources

If you might be one of the expected 1.6 million bankruptcy filers this year, consider contacting a local attorney to help you with the bankruptcy process.

Posted in Bankruptcy Filings, Bankruptcy News and Events, Bankruptcy Statistics, New Bankruptcy Law | Comments Off