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Bankruptcy Filings Surge Ahead Of New Law

Congress' Sell-Out of Taxpayers Takes Effect Monday

October 13, 2005
For financially struggling Americans debating whether or not to file for bankruptcy protection, the day of decision is at hand. And for all appearances, many are making a mad dash for bankruptcy court before a new law goes into effect Monday giving their creditors a distinct upper hand.

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The Boston Globe reports that in the first 11 days of October, more than 2,500 new bankruptcy cases were filed in Massachusetts, compared to 464 during the same period a year ago. More than 1,000 new cases were filed over the long Columbus Day weekend alone. The story appears to be the same in other parts of the country.

The U.S. Bankruptcy Court for the Western District of Missouri logged 494 new bankruptcy filings on Monday alone, a record number for a single day, according to the Kansas City Star. The court covers the western half of Missouri, including Kansas City, Springfield, Jefferson City and Joplin.

The U.S. Bankruptcy Court for the District of Utah on Wednesday reported 2,208 total bankruptcy filings last month, a 22.5 percent increase over the 1,803 total bankruptcy filings reported for September 2004, according to the Ogden Standard-Examiner.

Nationally, consumer filings for the week ended Oct. 8 posted a new record, averaging more than 20,000 filings per day. California-based Lundquist Consulting, a financial research firm, says that so far this year, bankruptcy filings are up nearly 20 percent over the same period in 2004.

The new bankruptcy law was passed earlier this year by a Congress supposedly facing a bitter partisan divide on nearly every major issue of the day. But lawmakers, lubricated by unprecedented lobbying and campaign contributions from the financial services industry, managed to put aside their supposed differences as the Bankruptcy Abuse Prevention and Consumer Protection Act sailed through the House of Representatives on a 301-126 vote and the Senate by a 74-25 margin.

Seen as Congress' gift to the credit industry, the new law will make it more difficult for individuals to get free of many debts, including most credit card bills. People who earn more than the median income for their state will be able to seek Chapter 7 elimination of debts only if they meet a "means test," which must be certified by their lawyers. Otherwise, they will have to file for Chapter 13 bankruptcy, which requires setting up a plan to pay back debt over five years.

The central tenet of the new law is that increased claims of bankruptcy have enabled abuses, allowing people to escape their debts without paying what they owe. The word "crisis" has been tossed about in much the same way as the debate over Social Security.

But a closer look reveals that a majority of those who declare bankruptcy in America do so because of real crises -- long-term unemployment, ballooning health care costs and the ruthless tactics of credit-card companies.

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