Is Another Bankruptcy Filing Boom Coming?

Is Another Bankruptcy Filing Boom Coming? """It has been nearly four years since Hank Paulson appeared on television and told the American people that we needed to prop up the institutions to prevent a financial catastrophe. Almost every average American's way of life was immediately altered by this headline. As a result, a record number of Americans filed for bankruptcy and faced foreclosure, and real estate prices fell dramatically. When the real estate market crashes, it affects every industry. First, the construction industry declines, then the consumer products sector follows closely behind. When consumers cease spending, overextended businesses have no choice but to declare bankruptcy. Some of the fortunate ones are able to reorganize by filing Chapter 11, but the majority have been forced to shut down by filing Chapter 7 bankruptcy.

As an increasing number of American enterprises declare bankruptcy, the consumer will soon follow. When enterprises close, unemployment increases, and the cycle repeats itself. In the past, the conventional media attempted to support the economy by reporting only partial news stories. In reality, unemployment is likely much higher than the recently reported 8.3%.

In the past, many people believed that individuals who filed for bankruptcy were unwilling to pay their debts. The truth is that most individuals are forced into bankruptcy by a life-threatening event. Unemployment, a severe illness or medical condition, and/or a family breakup leading to divorce are the most common causes of divorce. Filing for bankruptcy is not something that the majority of honest Americans aspire to do. There are some individuals who exploit the system and misuse bankruptcy. In 2005, this prompted the credit industry to lobby Congress for significant changes to the bankruptcy code. As a result of what occurred in 2008 and continues to occur, many people are disputing the justifications for these changes.

Changes to the bankruptcy code have made it more difficult for individuals to petition for Chapter 7 bankruptcy. A person registering for Chapter 7 bankruptcy must now pass a means test in order to qualify. If their income exceeds the state's median income, they will be required to file Chapter 13 instead. In certain circumstances, this can be catastrophic and set the individual up for failure. It has also become more difficult for individuals to file pro se. Although not required, it is advisable to employ a bankruptcy attorney to navigate the new bankruptcy code's complexity.

As the United States economy continues to slide downward, only time will tell if this bankruptcy filing surge will materialize. Conservative analysts predict that the stagnant bankruptcy filing rate of the past few years will shortly begin to accelerate and rise. Time alone will tell. ""Americans must heed the counsel of their grandparents and find a way to become debt-free.""

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