Bankruptcy Filings Decrease: Why? Shelter, Food, and Necessities of Life

25 Oct Bankruptcy Filings Decrease: Why? Shelter, Food, and Necessities of Life

Bankruptcy filings continue to decrease according to a report by Epiq Systems in a recent article at Credit Slips by Bob Lawless. According to the blog, bankruptcy filings are down more than 17% from 201o at the same time last year. This trend was reported in an earlier article at the New York Times. Since unemployment rates are still high and foreclosures continue to rise (up 23% from 2008), one might wonder why the decrease in bankruptcy filings?

My colleague Cathy Moran recently wrote about investing in bankruptcy as a tool to regain control of a debtor’s financial future. Cathy is absolutely right — when the time is right. My recent experience with folks coming in for consultations is that folks are too broke to even consider filing for bankruptcy–their unemployment has run out, the mortgage company isn’t foreclosing, and there is nothing for creditors to seize, even if a lawsuit is filed–no property, no money in bank accounts, no valuable assets, no wages, no land.

My advice to these folks is to wait to file bankruptcy until their immediate needsfor food, shelter, utilities are met. When those needs are met or even exceeded or a job is gained, then, bankruptcy is the next step to have a secure financial future. Just the knowledge that the creditors are out there waiting to pounce is frightening folks into coming in for consultations.

Robert Lawless who wrote the Credit Slips piece and who is quoted in the New York Times article stated in that article that there are many myths about what drives the bankruptcy rates — but that really, it is tied to the use of consumer credit. Mr. Lawless is correct: another recent article by the credit card industry points out the significant decline in the use of credit cards in 2011. Perhaps the credit card industry should be re-thinking the push they made in 2005 to amend the bankruptcy code to make bankruptcy filing more restrictive?

Image credit: Factoryjoeunder Creative Commons license

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I'm a consumer protection lawyer in Oregon, working with people in Klamath; Lake; Jackson; Josephine; Curry; and Deschutes County. I speak regularly on bankruptcy and consumer protection issues nationwide.
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