Bankruptcy Statistics Surrounding the New Bankruptcy Laws

The new bankruptcy laws made an impact on bankruptcy statistics.  Filings soared before the deadline when the new laws went into effect.  Filings then went down for a couple years and now they are heading back up.  The new bankruptcy laws were intended to stop bankruptcy filings for those who do not need to file and make the whole process a learning experience rather than simply a legal process.

Bankruptcy used to be a quick way to get rid of debts.  Now, though, more and more people are forced to file under repayment plans instead of discharging debts.  The new laws also require education about credit and assistance to help people learn how not to get into financial trouble again after they file their bankruptcy.

The concept of the new bankruptcy laws is a good one.  It makes this process more streamlined and helps prevent people form abusing the system.  It also made many people nervous because they may be unable to use the bankruptcy system to end their debt problems.

The Effect of the New Laws

The bankruptcy statistics available prior to the October 2005 initiation of the new bankruptcy laws showed that the filings in that last month were triple the average. 

In fact, over that last year before the new laws went into effect there were record breaking numbers of people filing bankruptcy in the country.  With it being estimated that one in every 53 households filed bankruptcy in 2005, the bankruptcy statistics for 2005 were the highest ever in history.

Most bankruptcies filed in 2005 were individuals, not businesses.  The bankruptcy statistics comparing these two groups show that 34,222 businesses filed in 2005 verses 1,748,421 individuals.

Chapter 7 bankruptcy statistics showed that 17 % more bankruptcies under Chapter 7 were filed n 2005.  Business bankruptcy under Chapter 11 actually went down.

A surprising bankruptcy statistic from 2005 was the increase in the number of Chapter 12 filings.  Chapter 12 bankruptcy is for farming families.  Chapter 12 bankruptcy went up by 53%.

After the new laws went into effect the bankruptcy filing rates dropped by 50% or more, leading to the lowest bankruptcy statistics in years.  

The Effects Today

As the economy is getting worse bankruptcy filings are back on the rise.  However, the number of Chapter 7 filings will likely never be as high as they were in 2005 before the new laws.  In fact, the total number of filings will likely remain lower than that record breaking year simply due to the restrictions put in place by the new laws.