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April 18, 2008 at 08:00 PM
The federal bankruptcy overhaul that passed in October 2005 isn’t doing what it is supposed to do, which is cut down on the number of frivolous bankruptcy filings, those filings that were meant to avoid paying off credit cards that had been run up excessively.
The biggest reason it hasn’t succeeded in that, according to a survey of members of the National Association of Consumer Bankruptcy Attorneys, is because those particular filings account for such a small percentage of overall filings.
Consumers are forced into bankruptcy by job loss (39.6 percent) and emergency medical expenses such as long term care (33 percent) far more often than because of “discretionary spending habits” (8.1 percent), according to the survey.
While filings spiked before the law went into effect and fell immediately thereafter, 57.5 percent of bankruptcy attorneys surveyed said they expect the number of filings to reach preoverhaul levels by or before October 2007, the law’s second anniversary.
