Thursday, August 19, 2010

Double-digit jump in bankruptcies

The Hill reports that the nations bankruptcy filings rose 20 percent in the 12-month period ending in June, according to the Administrative Office of the U.S. Courts.

The over 1.5 million filings marks the highest number of bankruptcies to occur in a 12-month period since the bankruptcy reform act was enacted in 2005. The legislation was intended to make it harder to file for bankruptcy by restricting the number of Chapter 7 filings, which forgive most debts, and pushing debtors to file Chapter 13, which requires some of the debt to be repaid. The bill created a means test to determine which filings could use which bankruptcy.

When the bill passed Congress, several who opposed it said it was wholly created by the credit card companies because Chapter 11 bankruptcies, which businesses mostly use to organize debts, was not a part of the reform.

Supporters of the bill contended Chapter 11 bankruptcy was not materially altered because the legislation was aimed at addressing individual bankruptcies.

Tuesday’s findings show that individual and business bankruptcies increased over last year, up 21 percent and 8 percent, respectively.

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