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US Bankruptcy: Immediate Effects of the Bankruptcy Amendments in 2005
Chapters of the Act
Bankruptcy as we all know means insolvency and the inability to pay ones debts. In 2005 the old Bankruptcy act of 1978 was amended. These revolutionary amendments to the 1978 bankruptcy law in 2005 had a salutary effect on bankruptcy filings. Bankruptcy filings means the cases filed under various chapters of the Bankruptcy act. The chapters under which Americans file bankruptcy cab briefly summarized as follows.
The first section of the act that attracts attention is chapter 7 of the Bankruptcy Code. This is available to both individual and business debtors. Its purpose is to achieve a fair distribution to creditors of the debtor’s available non-exempt property
Next we have Chapter 11 of the Bankruptcy Code is available for both business and consumer debtors. Its purpose is to rehabilitate a business as a going concern or reorganize an individual’s finances.
The third is Chapter 12 of the Code. This is a special chapter designed to give special debt relief to a family, farmer or fisherman with regular income.
Lastly we have Chapter 13 of the Bankruptcy Code which is available to an individual with regular income whose debts do not exceed specific amounts. It is applicable to those who pass a ‘means test’; it in cooperates a payment up to 5 years.
Statistics after the Passing of Amendment
The statistics of bankruptcy reveal startling figures. This data about bankruptcy filings can be accessed from the net. This is one good use of the net. These searches use a search method called segment searching.
One can access on the net the LexisNexis services which provide federal bankruptcy filings from all 50 states of the American union as well as the District of Columbia, Guam, and Puerto Rico. The information on bankruptcy filings contains typically information on the petitioners name and address, the filing number of the case as well as the date of filing. There is information also on the name of the trustee and assets and liabilities as well as the concerned chapter in which the case had been filed.
This is a virtual store house of information. These bankruptcy filings are Automatic display files (ADF) and can be assessed by all who wish to assess the data.
Facts and Figures after Passing of the Law
Just after passing of the law, statistics have shown that US personal bankruptcy filings jumped 40 percent in 2007. This jump is attributed to rising mortgage payments, job losses and other financial pressures. This is not a happy statistic.
Records also reveal that more than 800,000 personal bankruptcy filings were made in 2007, compared with more than 573,000 in 2006 — the lowest level since 1998, according to data collected by the National Bankruptcy Research Center and published by the American Bankruptcy Institute, a research group in Alexandria, Va.
The increase in 2007 followed by a sharp decline earlier is worth examining. In 2006 the decline can be attributed to the new bankruptcy law of 2005 which made it more difficult for consumers to seek bankruptcy-court protection from creditors. The average filings of bankruptcy in the USA was nearly 1.5 million annually. But after an eight-year campaign by banks, retailers and credit card companies, Congress in 2005 passed the biggest changes in U.S. bankruptcy laws in a quarter-century, mandating an income test to measure a debtor’s ability to repay obligations.
Personal bankruptcy filings soared to more than 2 million in 2005, with more than 600,000 filings made in October, when the law came into effect.
Consumers who had insufficient assets or income could still eliminate debts through a Chapter 7 bankruptcy. But those with income above their state’s median income who could pay at least $6,000 over five years had a remedy only under chapter 13. Filings by individuals or households with consumer debt increased 40.15 percent to 603,139 for the nine-month period ending Sept. 30, 2007, from 430,364 filings during the same period in 2006. The overall percentage of consumers filing for chapter 13 protection fell slightly from 41.41 percent during the first three quarters of 2006 (Jan. 1-Sept. 30) to 38.87 percent over the same period in 2007. Conversely, the percentage of chapter 7 consumer filers increased to 61.06 percent during the first nine months of 2007 from the 58.50 percent recorded during the same period of 2006.
Business filings for the nine-month period ending Sept. 30, 2007, totaled 20,260, representing a 40.45 percent increase over the similar nine-month 2006 total of 14,425. Chapter 7 business liquidations totaled 13,290 in the first three quarters of 2007, a 57.60 percent increase over the 8,433 business chapter 7 filings during the same period in 2006. Chapter 11 business reorganizations also rose from 3,644 in the first three quarters of 2006 to 4,130 in the same period of 2007, a 13.34 percent increase.
These bankruptcy filing figures speak for themselves. One can draw his own conclusions. The latest figures have a similar trend , but examining these figures almost a decade old show that the Bankruptcy Law of 2005 did have far reaching consequences