The total number of bankruptcy filings dropped 14% from January to January of the prior year. In fact, the year over year filing totals have been declining for over four years, specifically for 50 consecutive months. You would think that by four years of decreased filings that things in the United States would be great. However, this is obviously not the case. The unemployment rate still remains relatively high. The amount of take-home pay that a family receives per year has dropped by approximately $2000 in the last six years. The housing market has lifted itself off of its bottom however the gains are very moderate at best. The only anomaly is the stock market which seems to be doing well as people’s 401(k)’s and other retirement vehicles are improving. So what is the reason for this?
Samuel J Gerdano of the American bankruptcy Institute cites the fact that there are high costs involved in filing and sustained low interest rates. I think we can quickly debunk the high cost of filing as a reason for the decrease in filings. As filings decrease, bankruptcy attorneys become much more competitive. After 50 months of year-to-year drops in filings, bankruptcy attorneys are advertising at a much lower price point than they have since the law changed back October 17, 2005. In addition, many attorneys are working with payment plans that will allow the debtor to file the bankruptcy case without the fees being paid in full. Further, chapter 13 bankruptcies don’t require a heavy attorney fee down. The filing fee for chapter 13 is $310 at the present time. This is certainly not a barrier to filing bankruptcy.
I’m also not convinced that the current low interest rate is slowing down filings. Most of the filings I see have nothing to do with low interest rates. They have everything to do with high interest credit cards, payday loans, title loans, internet-based loans, and medical bills. Those that can obtain the low interest credit are those applying for mortgages or reorganizing their mortgage through some sort of modification. I believe the decrease in filings is based on the tightening of credit despite the fact that there are some low interest rates out there for homeowners. I still see crazy interest on credit cards and especially on secondary lender such as title loans and payday loans.
While bankruptcy filings are down 14% this year to last year, I do see an increase in the city of Chicago putting their foot down on people. I see a heavier amount of ticket writing including booting of vehicles during this past year. I see a greater number of clients worried about their drivers’ licenses being suspended for parking tickets than in any year in the past. It makes sense. When the city is having budget shortfalls and hurting for revenue, it looks to tap the general public. What better way and easier way is there then to put more people on the street dealing with parking tickets and then threatening to boot or suspend the license for those that have three or more tickets outstanding.
The bottom line is that we need to continue to push forward as a country. We need to hope that the government will make it easier for new businesses to open and for manufacturers to succeed. Don’t let the fact that bankruptcy filings are down 14% fool you into thinking that everything is wonderful. In fact, it’s quite the contrary. The people that I speak with and meet with every day are hurting terribly. The country needs to get back to work. Its people would love to have that opportunity as well. People desire to work. There just isn’t enough good work out there.