As the calendar months tick off, we are approaching the eight year anniversary of the passage and implementation of the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA).
For those that don’t know, this “new bankruptcy law” increased the burdens and costs of filing bankruptcy. It also created numerous obstacles and barriers for both debtors and attorneys.
Just prior to the law change, the bankruptcy world was in a complete frenzy.
Many debtors rushed to file before the law changed knowing that things would get harder in the post-BAPCPA world.
Over the last 33 years, 2005 saw the highest number of bankruptcy filings. Over 2,000,000 bankruptcy cases were filed that year. 2005 also saw the highest percentage of consumer filings in relation to total filings.
Over the previous two years, bankruptcy filings have been steadily declining. 2012 saw the lowest number of filings in 15 years, and it appears that trend will continue this year.
While the numbers seem to support that prediction, the article proposes an interesting theory about a “surge” in filings towards the end of this year.
8 Year Rule
Prior to BAPCPA, debtors could receive a discharge in chapter 7 bankruptcy every 6 years. BAPCPA extended this to 8 years.
Essentially, you can only file chapter 7 bankruptcy once every eight years now.
BAPCPA went into law October, 2005 so we are quickly approaching the 8 year anniversary. Many people that rushed to file bankruptcy prior to the passage of BAPCPA will be eligible to file again this year.
Possibility of a Surge
Will we see a surge in bankruptcy filings simply due to the passage of time? It is an interesting question.
Normally I would say no. Most people who file bankruptcy are not even aware of the 8 year requirement and despite misconceptions of abuse, repeat filings are actually pretty rare.
On the other hand, I think the times have changed and a surge is possible.
2005 was pre-recession so while most people are able to improve their financial situation post-bankruptcy, the 2005 filing group faced a different environment.
Rising unemployment, inflation and a crashing housing market probably impacted these people in a different way. It is highly likely that 2005 filers were simply not able to recover post-discharge and fell back into financial hardship.
I guess only time will tell and it will be very interesting to look at the statistics at the end of the year to see if there were a higher percentage of repeat filers.
I only hope that people who need financial help do seek it. Bankruptcy is a rehabilitative process so whether you filed previously or not, it can improve your current financial situation and mark a path to a brighter future.
Image courtesy of Photosteve101 (Flickr).