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Bankruptcy attorneys and advice are in demand as bankruptcy filings are rising

Thu Aug 28, 2008 03:08PM | By Tony

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Bankruptcy attorneys are having a field day, or rather a year. The number of people and businesses seeking bankruptcy advice or heading to bankruptcy courts is very high. According to government figures released Wednesday, bankruptcy filings surged 29% in the 12 months that ended June 30, totaling 967,831 vs 751,056.

If you think about for a minute, this is the staggering number, being so close to a million, which it is going to surpass in my opinion this year. If you think I am all about doom and gloom, consider that American Bankruptcy Institute expects filings to reach 1.2 million this year. Even more dreadful is the fact that filings for Chapter 7 bankruptcy rose 36% to 615,748 in the same 12 months. Now you have to understand that filing Chapter 7 in itself is quite a lot of work, and having a qualified bankruptcy attorney is a must. Chapter 7 bankruptcy is designed to give individual debtors a fresh start by discharging many of their debts. Of course some of your assets can be liquidated and given to creditors first in line for repayment, while the rest of your debts are cancelled, but believe me, but the time it is all said and done, there is very little if anything left for the creditors. So basically, it was a free ride out of your financial stupidity more often than not.

The 2005 Bankruptcy Abuse Prevention and Consumer Protection Act cracked down mainly on Chapter 7, exactly because of that, making it much harder to receive Chapter 7 bankruptcy protection. Huge numbers of people rushed to file before the deadline and then filings dropped off extremely sharply in 2006-07. Very few potential filers could meet the very stringent requirements under the law. To qualify you must have been in such dire straits, that even best bankruptcy attorneys with their costly advice could offer no help. So why bankruptcy numbers increase? Because more and more people are in those dire straits and possibly worse.

And what about the rest of bankruptcy filings? Not much better, if not in shear numbers, then in percentage jump. Filings for Chapter 13, another type of individual bankruptcy which requires debtors to pay back their debts over time rose 17% to 344,421 from 294,693 a year earlier, while filings for Chapter 11 bankruptcy which is aimed at assisting struggling corporations or partnerships, rose more than 30% to 7,293. Chapter 11 bankruptcy numbers will increase quite sharply in my opinion, as small and not-so-small business struggles - from small shops and stores, to strip malls, to giant warehouses worsen.

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