Economic Pressure Adds to Bankruptcy Caseload
New York-Personal bankruptcy filings are now approaching one million as the credit crunch and deteriorating economy effects household finances. According to legal helpers, a national personal bankruptcy law firm, year-to-date figures of personal bankruptcy filings nationwide has risen to 931,873. This flux of filings is occurring some three years after the Bankruptcy Abuse Prevention and consumer protection act passed.
"Chapter 7 and Chapter 13 filings are an unavoidable fact of life, particularly given the current economic climate," said Richard K. Gustafson of the law offices of Macey & Aleman. "Individual households nationwide are struggling to make ends meet as food and fuel prices skyrocket and their heavy, expensive mortgages come home to roost."
The Bankruptcy Abuse Prevention and Consumer Protection Act, designed to reduce the number of personal bankruptcy filings, came into force in 2005 amidst a rising prevalence of Chapter 7 voluntary petitions. This act introduced a compulsory means tested element to the Chapter 7 filing process.
However, after an initial decline in the frequency of personal bankruptcy, the figures for Chapter 7 and the less popular Chapter 13 procedures in 2008 have risen 28% on the year, as the impact of the mortgage meltdown and turmoil in the housing market take their toll.
Mr. Gustafson added that the input of experienced legal personnel in handling Chapter 7 and Chapter 13 filings has become imperative given the complexities of filing introduced by the act and the growing financial pressures on average homeowners.
"The 2005 act has done very little in practicality to protect those financially vulnerable consumers choosing bankruptcy as a last resort, and if anything has introduced more complexity and red tape to the filing process. Now, more than ever, the services of reliable, experienced personal insolvency practitioners are imperative to the filing process and to maintaining the dignity of those falling victim of the current economic conditions."
An unstable economy built on the foundations of a troubled housing market has resulted in ordinary families feeling the pinch. Coupled with rising food and energy prices, financial uncertainty and global economic panic, the financial burden for many ordinary homeowners has intensified.
Jack Williams of the American Banking Institute said that the problem will get worse before it gets better in spite of the provisions of the 2005 act, anticipating an even greater rise in personal bankruptcy filings before the year is out. "The people who thought they could reduce the number of filings have failed. I expect bankruptcies in 2008 to exceed 1.2 million filings," he said.