Bankruptcies Rise 32% in 2009, 1.5 Million Went To Court
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Almost 1.5 million bankruptcies were recorded in 2009, a number up 32 percent from 2008 — and a number that was not supposed to happen.
Huh? How come there were not supposed to be so many bankruptcies.
Well, to put this as nicely as possible, the so-called Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 was supposed to end many if not most bankruptcies — and it did.
The “consumers” protected under the legislation were banks, mortgage companies, credit card companies and student lenders. As we have reported, among other goodies for big lenders, the new law provided that most student loans can no longer be discharged. If your income exceeds the state medium you can be forced to file under Chapter 13 (a repayment program) and not Chapter 7 (a discharge and forgiveness plan). Credit debt is not forgiven if you spend at least $750 in the 70 days prior to seeking bankruptcy protection — say a cash advance to pay off a looming mortgage payment.
Perhaps most importantly for mortgage borrowers, the 2005 legislation says homeowners must obtain credit counseling and develop a budget analysis in the 180-day period before filing for bankruptcy. The result is that many borrowers will have lost their homes to foreclosure before even getting into a courtroom.
There were 1,597,462 bankruptcies in 2004 and 2,078,415 bankruptcies in 2005. As for 2006, bankruptcies declined 70 percent to 617,660 cases.
In 2009, despite massive efforts to manipulate the system and protect creditors, the Administrative Office of the U.S. Courts says there were 1,473,675 bankruptcies, up 31.9 percent from 2008.
Source: U.S. Courts
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