Obama's Economy

Has the Bankrupcy Code made it too easy for debtors to avoid their obligations by filing for bankruptcy?

What are the implications of the increased number of bankruptcy filings for future potential debtors who seek to obtain credit?

The rise in filings is largely due to the tanking of the sub prime mortgage lending market. This was in the coming for at least two years and has come full circle this year. It is not too easy to avoid obligations. If someone wants to file a second time after a discharge, it is an 8 year wait between two chapter 7 cases.

Additionally, Child Support, Maintenance, taxes and student loans are all non dischargeable. The impact it has on debtors trying to obtain credit is that immediately after the discharge it will be easier to get high interest credit cards because it will be 8 years before that person can file again so it gives the lenders more time to collect.

I think the new law passed in 2005 didn’t really add much to the bankruptcy code. It mostly just requires more work for attorneys and more documentation from debtors. It is nice that they want to decrease bankruptcy fraud, but they aren’t targeting the right group of debtors with the current laws. Additionally the credit counselling and debtor education requirements aren’t likely to help people because all they do is fulfill a formality. Some debtors want to take the courses, but others do it only because the bankruptcy won’t go through otherwise.

Part of the problem is that there are lenders that want to make it harder to get debts discharged (which the new law didn’t really succeed in doing), but at the same time they want to lend to anyone and everyone whether they are a good risk or not. There are a lot of predatory lenders out there, and until that goes down, bankruptcy is necessary for those that are duped into borrowing large sums at high interest rates.

While the new law was an attempt to make it harder for chapter 7, I have yet to encounter a client that couldn’t file a chapter 7 for income reasons.

BANNER YEAR FOR BANKRUPTCY; FILINGS ROSE 30 PERCENT IN 2009 BUT 2010′S NUMBERS MAY GO HIGHER.(Business): An article from: The Santa Fe New Mexican (Santa Fe, NM) $9.95 This digital document is an article from The Santa Fe New Mexican (Santa Fe, NM), published by The Santa Fe New Mexican on March 30, 2010. The length of the article is 702 words. The page length shown above is based on a typical 300-word page. The article is delivered in HTML format and is available immediately after purchase. You can view it with any web browser.Citation DetailsTitle: BANNER YEAR…

Bankruptcy numbers: business filings climb in May.: An article from: New Hampshire Business Review $9.95 This digital document is an article from New Hampshire Business Review, published by Business Publications, Inc. on June 17, 2011. The length of the article is 390 words. The page length shown above is based on a typical 300-word page. The article is delivered in HTML format and is available immediately after purchase. You can view it with any web browser.Citation DetailsTitle: Bankruptcy numbers:…