Personal Bankruptcies

The economy is strong, inflation and interest rates low, and personal bankruptcies are at an all time high - a record 1.35 million last year. The vast majority of filers choose Chapter 7, which discharges virtually all of a debtor’s obligations, as opposed to Chapter 13 which requires that a portion of debts be repaid. Encouraged by favorable economic conditions, consumers may simply have taken on too much debt. Or perhaps bankruptcy doesn’t carry the stigma it once did. Whatever the reasons behind the surge in filings, the credit card industry is backing a number of bills in Congress that would "reform" the system - that is make it more difficult for consumers to get relief. A proposed legislation would transfer the problem to courts and their trustees, which manage Chapter 13 collections and disbursements. Because it’s so controversial, the legislation isn’t likely to pass this year. Leadership in Congress recently named bankruptcy law as one of its top ten priorities.