Bankruptcies Rise 32% in 2009, 1.5 Million Went To Court
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
Interestingly enough, as provisions of the newly-minted Patient Protection and Affordable Care Act go into effect we are likely to see both fewer bankruptcies and fewer foreclosures. Why? Because people who can’t pay their medical bills can’t pay their mortgages.
it’s remarkable that in the U.S. if you get sick you can lose your home and your savings. The new legislation should greatly broaden the availability of healthcare for most and thus reduce the financial distress of disease, illness and accidents.
Some will scream from their bunkers that the new legislation is “socialism,” but this is the same argument made when Social Security was passed. Today you can’t find a lawmaker willing to introduce legislation to get rid of Social Security. If people were seriously against “socialism” you\’d think they would want to do away with VA benefits and Medicare but magically that doesn’t seem to be on the agenda.
The reality is that we don’t have a purely capitalist country. We have what’s described as a mixed economy, taking the best from whatever system and approach makes the most sense.
Others are incensed about the cost of widespread health insurance. These same people were utterly silent about the eight years of Bush/Cheney administration when the federal deficit increased by $4.35 trillion. And certainly these folks have had nothing to say about the money and human cost of the Iraq war, a war that was contrived and unnecessary.
You can bet with absolute certainty that 20 years from now we will have real national healthcase, something better than the bill just passed — and that no elected official will favor its repeal.
The bottom line is that in 2008 the country overwhelmingly rejected the politics of the extreme right, politics which virtually bankrupted the country and policies for which we are still paying. Now the Obama Administration has delivered at least some of what was promised in the way of healthcare. Next, what about banks and credit cards? Wall Street? Immigration?
Stay Tuned.
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