With changes to Bankruptcy legislation limiting the amount of debt that can be written off, personal bankruptcy filings dropped to their lowest level in 20 years
during 2006's first quarter, according to financial research firm
Lundquist Consulting Inc.
Between January 1 and March 31, filings fell 73 percent, to 102,949,
compared to the same period a year ago. On an annualized basis, one in
every 261 households filed for bankruptcy in the quarter, as opposed to
one in every 73 households a year ago.
Chapter 7 filings, where debts can be wiped out entirely, except
under certain circumstances, were 80 percent lower in the first
quarter. Meanwhile, Chapter 13 filings, which require consumers to
repay a part of their debts, were 53.6 percent lower than the year-ago
period. All regions of the country showed a decline in first-quarter
Still, filing rates have increased fourfold since November, about
two weeks after stricter bankruptcy laws took effect on Oct. 17. In
November, filings totaled 500 a day, while in March, filings totaled
more than 2,000 a day. Filings averaged 7,000 a day in March 2005.
The Administrative Office of the U.S. Courts said that b ankruptcy
filings rose 10 percent in 2005, compared to a year earlier, to a
record 1.78 million. Non-business filings, which backers of the tougher
bankruptcy legislation said are increasingly driven by consumer debt,
accounted for 98 percent of all filings.