06 March 2014

Bankruptcy Filings Falling

Given the flavor of day-old pottage that characterizes the American economy, folks might be surprised that bankruptcy filings continue to fall. Go here to the American Bankruptcy Institute newsroom for details about February's year-on-year decline.

ABI director Sam Gerdano explains for the nth time that a combination of historically unprecedented low interest rates, careful credit underwriting (not so sure about that but maybe), and the "high costs of filing" account for the doldrums in the world of bankruptcy law. The first and third reasons are clearly the case. Just yesterday over lunch a friend asked how it is that folks who are about to file bankruptcy can afford to file bankruptcy. Usually it's one more trip to the friends and family well or, coming up soon, income tax refund checks.

What's should strike most folks as sad is that the changes wrought by the Orwellian-ly named Bankruptcy Abuse and Creditor Protection [sic] Act of 2005, which certainly increased the cost--and thus decreased the numbers--of filing bankruptcy, hasn't put any money in creditors pockets. Turnips is still turnips and not much blood to be found among them.

While one might think that lawyers would be equally happy with fewer but higher paying bankruptcy cases, one would be wrong. Trying to save some buck folks get their bankruptcy forms from the internet and try DIY. Not at all smart as most get dismissed and those that make it through the system to the hoped-for Nirvana of discharge have probably unnecessarily reaffirmed some foolish debts along the way.

Oh, did I mention that student loans are nondischargeable?

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