LexisNexis Bankruptcy Expert Says Decline Then Rise of Chapter 7 Filings Not Surprising

A 99.2 percent decline in Chapter 7 personal bankruptcy filings in the last half of October versus the first 16 days of the month was no surprise, according to an editor-in-chief of one of the nation’s leading bankruptcy publications.

Henry J. Sommer, Esq., co-editor-in-chief, of Collier on Bankruptcy, a LexisNexis publication, says this decline was expected after the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 became law on Oct. 17, 2005.

According to LexisNexis U.S., a leader in comprehensive and authoritative legal, news and business information and tailored applications, the downward trend in Chapter 7 bankruptcy filings continued throughout the final months of 2005. Filings dropped by 91 percent and 87 percent in November and December 2005 compared to the same time frame in 2004.

That trend, however, seems to be abating. Data obtained from LexisNexis® CourtLink® show January 2006 Chapter 7 filings already are on quick pace with 4,243 filings from January 1-13. Even more postings are being seen in Chapter 13 (5,922).

“It’s not a surprise to me personal bankruptcies are on the rise again,” Sommer said (bio sketch below). “Think about it – doubling of minimum credit card payments; higher interest rates; energy costs; and questions about whether the housing bubble can be sustained – all contribute to financial disaster for American families.”

Sommer maintains getting professional legal counsel is the only way to navigate the waters of personal bankruptcy. Several troubling areas for consumers who need credit counseling have come to light with the new 2005 bankruptcy legislation.

“People who don’t speak English are finding it particularly difficult to obtain the credit counseling briefing that is required before a bankruptcy case can be filed,” added Sommer. “We don’t see this issue being resolved any time soon, either. In addition, consumers are not always being told credit counseling fees can be waived if the finances are not there to afford the service. These problems must be addressed to ensure that everyone who needs access to the bankruptcy courts can obtain the necessary relief.”