The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 was implemented to reduce consumer bankruptcy filings. Apparently, it worked.
The year 2005 saw a rapid increase in bankruptcy filings as financially distressed consumers rushed to file before the new law was implemented. Whereas bankruptcy filings had numbered between 1.4 million and 1.6 million in each of the prior 4 years, over 2 million consumers filed for personal bankruptcy in 2005.
Since the law was implemented, the number of personal filings has dropped dramatically. There were 70% fewer bankruptcy filings in 2006 with just under 600,000 total filings.
The number of consumer bankruptcy filings increased some in 2007, with over 800,000 filings reported. While this represents a 37% increase over 2006, it is still half what was averaged in previous years.
Most analysists expect that this trend will continue as American consumers are squeezed both at the gas pump and at the supermarket. Wages simply are not increasing as fast as gasoline and food prices.
Even the recent economic stimulus payments cannot prevent the U.S. economy from falling deeper into recession. Consumers are carrying more debt now than ever before.
One way that consumers can keep from following this debt trap is to get help now from a nonprofit credit counseling organization. A reputable tax-exempt organization can give you the help that you need to avoid default and diminish the chances that you might need bankruptcy protection.
Tags: Bankruptcy