Personal bankruptcy filings are steadily rising. The total number of cases filed increases each year, and more telling, the percentage of working men and women who file, are both accelerating rapidly. Only Chapter 11 business filings have decreased in recent years. On average, American families carry more debt today than at any time in United States history.
With good jobs in short supply, this unprecedented financial strain upon middle America is causing widespread concern among economists and creditors according to Alan Greenspan, Chairman of the Federal Reserve Board. The profile of the average debtor who files personal bankruptcy has changed. Wealthy individuals seldom file. The poorest segment of our population seldom files with the US Bankruptcy Courts. The typical debtor in personal bankruptcy is an average income earner who either:
1) lost employment, 2) recently contested divorce, or 3) suffered debilitating injuries or illnesses. Of all people filing personal bankruptcy, 80% fit into at least one of these categories.
New Bankruptcy Laws for the US Bankruptcy Courts
The Congressional solution to rising middle-class personal bankruptcy rates is perplexing. Special interest groups proposed new bankruptcy laws that are specifically designed to limit individual access to US bankruptcy courts, including: 1) new bans on Chapter 7, 2) increased Chapter 13 payments, 3) new presumptions against debtors with increased penalties, and 4) the reduction of judicial discretion to balance competing interests. These proposed new bankruptcy laws become effective October 17, 2005.
Personal Bankruptcy Types For Individuals
Today, personal bankruptcy under Chapter 7 eliminates debt through discharge. Chapter 13 bankruptcy (sometimes called “wage earner plans”) reorganizes debts for either full or partial repayment over up to 5 years. Chapter 11 offers more complex reorganization of debts, while Chapter 12 applies only to family farmers. Of all bankruptcy types, Chapter 7 & 13 are chosen by most individual filers because these chapters are cost effective. Both chapter are still available under new bankruptcy laws but according to different qualification.
Personal Bankruptcy Courts
For anyone considering filing personal bankruptcy without an attorney, free bankruptcy forms are available from US Bankruptcy Courts online. Also, many bankruptcy software programs are available which offer bankruptcy forms in a format that spots errors, and consequently, prevent dismissals. Whether either of these options is right for you deserves careful consideration. For most people who file, who own any significant assets, the cost of quality legal representation throughout the entire process is inconsequential.