Thanks in large part to much tougher laws and regulations, the number of people who filed bankruptcy in the past year has fallen by nearly 40% and now sits at a 10 year low.
According to the Administrative Office of the United States Courts, the number of individuals and businesses filing for bankruptcy protection fell from 1.78 million to 1.11 million. Much of the credit for the reduction in filings can be attributed to a law passed in October of 2005 which increased the fees for filing for bankruptcy protection and made it harder for personal debts to be forgiven.
Unfortunately, thanks to the fizzling housing market, this may ultimately be the low point for the number of people filing for bankruptcy protection thanks in large part to the fact many people have resorted to using creative financing in order to get into a house they might otherwise be unable to afford.
In addition to that, may people who already owned homes have tapped into their home’s equity in order to finance car purchases, vacations or to pay down massive credit card debt. While interest rates were relatively low, this made plenty of sense, however since The Fed started raising rates, many people have slowly begun to realize they may not be able to afford their new monthly payments.
All that being said, it is nice to see the number of bankruptcy filings decrease. Hopefully it’ll continue into the future!
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This may have been true in 2006, but 2009 onwards is going to be a very different story, both in the UK and abroad. – Debt is rising and bank are unwilling to lent.