Going Bankrupt is it Easier to Consolidate Debt?
Americans are going bankrupt at an unprecedented rate. The failure of Fannie Mae and Freddie Mac has set off an avalanche of consumer panic. Unemployment rates are skyrocketing, business doors are closing, consumer spending has hit an all-time low and bankruptcy filings are going through the roof.
It's not only U.S. citizens going bankrupt. It's the entire world economy. Changes need to be made quickly in order to maintain any stability in worldwide markets. Otherwise, the entire global economy will be going bankrupt and we will be in much worse shape than we are now
Recently, The American Bankruptcy Institute gathered data from courts and public records to track bankruptcy filings. The study revealed that a large percentage of Baby Boomers are going bankrupt. The percentage of filings by Americans over the age of 45 increased nearly 30 percent in the past eight years. The ABI study also revealed the sharpest increase in bankruptcy filings occurred among people 55 and older filing for Chapter 7 bankruptcy protection.
Overall, the percentage of people going bankrupt in 2007 rose by nearly 70 percent. Experts predict a record-breaking 1.5 million bankruptcy by the end of 2008. Taking into account the high rate of business and personal bankruptcies, experts predict the number of bankruptcy filings could more than triple by 2009. By 2009, the number of bankruptcy filings could more than triple.
Currently, bankruptcy courts are clogged with pending and new bankruptcy filings. Part of the problem stems from the fact that many homeowners with subprime and adjustable-rate mortgages can no longer afford their mortgage payments. Due to the current state of economics, lenders are no longer providing home equity loans; eliminating the potential for homeowners to consolidate debt.
To make matters worse, bankruptcy courts are still in transition from the new bankruptcy laws implemented in 2005. The purpose of the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) was to prevent consumers from filing bankruptcy because of frivolous spending habits. In the past, many consumers were racking up enormous credit card debts, than filing for Chapter 7. Doing so allowed them to have outstanding debts discharged; albeit causing substantial damage to their credit history.
The new bankruptcy laws put a stop to that. Now consumers must undergo credit counseling and submit to the 'means' test to determine how much of their debts must be repaid. A large percentage of Americans are forced to file for Chapter 13 protection based on the strict regulations of BAPCPA.
Chapter 13 requires repayment of debt over a period of three to five years. A large percentage of disposable income must be contributed toward the repayment. If the debtor is unable to adhere to the repayment plan, they can potentially fail out of bankruptcy, causing them to lose everything.
Going bankrupt is a hard pill to swallow. It can be stressful and emotionally draining. However, it is important to realize there is life after bankruptcy. If you haven't already done so, now is a good time to thoroughly review your financial situation and determine what went wrong and how you can prevent it in the future.
Published on November 02, 2008 at 11:25 AM | Comments: 1
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