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Consumer Bankruptcy Filings Hit Post-Reform Peak in July of 2009

August 18, 2009

Our Riverside County bankruptcy attorneys noted late last month that consumer bankruptcies were likely to hit their highest number since the 2005 bankruptcy reform law took effect. Now, an Aug. 4 article from Bloomberg News confirms it: According to numbers from the National Bankruptcy Research Center, July 2009 consumer bankruptcy filings did indeed hit their highest level since October of 2005. The American Bankruptcy Institute, a group of consumer bankruptcy attorneys, judges, accountants and bankers, said filings rose 8.7 percent in July over June's numbers and a staggering 38% over July 2008.

Bankruptcy lawyers quoted in the article agreed that the bad economy is to blame for the sharp rise in bankruptcy filings. High rates of unemployment and foreclosure, along with the tightening of consumer credit rules, have driven bankruptcy rates steadily higher throughout 2009. This is particularly noteworthy for our Murrieta bankruptcy lawyers because the obstacles to declaring bankruptcy increased with the 2005 reform law. The reforms included mandatory credit counseling for all filers, regardless of their circumstances, before they may file. After that is completed, filers must take a "means test" dictating whether they may file a Chapter 13 (reorganization) or Chapter 7 (liquidation) bankruptcy.

The result, as we have noted in the past, has been to shuttle those who do file for bankruptcy into Chapter 13, which is lengthier and more profitable for creditors than Chapter 7. In fact, our Orange bankruptcy attorneys believe the reforms discouraged bankruptcy filing, which makes it all the more remarkable that bankruptcies are increasing so drastically anyway. In our practice, we see clients every day who are dealing with devastating financial blows dealt by the bad economy, including job losses, a sharp drop in home values and arbitrary changes to their credit card limits and interest rates. Under those circumstances, an increase in bankruptcy filings nationwide may be inevitable.

If you're fed up with creditors' phone calls and you're ready to take action, Anaheim-based Howard Law LLP can help. We start each bankruptcy case by carefully reviewing the client's financial information, to decide whether bankruptcy is really the best choice. From there, we use knowledge about California and federal bankruptcy law to point clients toward the type of bankruptcy best suited to their needs, and guide clients through the procedural and legal hoops they must jump on the way. We also offer alternatives to bankruptcy that can help some clients, including aggressive loan modification services for financially troubled homeowners and debt settlement for people with large amounts of credit card or medical debt.

Howard Law offers free, confidential consultations to all potential clients, where they can tell us about their cases and learn more about their options. To set one up, please contact us online or call us toll-free at 1-800-872-5925.