California Bankruptcy Rates Soar Despite 2005 Overhaul

Five years ago, bankruptcies in California and across the nation soared to record levels as debt-strapped consumers raced to seek court protection before Congress changed the law to curb what had been considered an epidemic of filings, the San Francisco Chronicle reported on Sunday. For a while, filings dropped, but the recession has forced so many people into dire straits that bankruptcies in California are setting new records. "The states with the most acute housing crises have had the most elevated filing rates," said ABI Executive Director Sam Gerdano. The volume of filings nationwide also is approaching 2005 levels, as the Bush-era reform bill that raised fees and eligibility standards is rendered moot by rising joblessness and sinking home values. The upward trend in filings rekindles the debates that occurred five years ago over whether irresponsible consumers or predatory lenders are primarily to blame for bankruptcies, and whether the current law is the right fix or an unfair burden for debtors seeking a fresh start. The Government Accountability Office, the nonpartisan watchdog agency of Congress, told lawmakers in June 2008 that the 2005 law boosted chapter 7 expenses from about $914 to $1,477, including legal, filing and counseling fees. That office did not put a figure on the more complex chapter 13 filings, but said that in most cases the attorneys fees charged to debtors had risen 55 percent or more. Prof.Lois Lupica of the University of Maine, is in the middle of a multiyear study funded by the ABI Endowment Fund to get a better fix on costs and if BAPCPA's changes keep some debtors who may qualify for bankruptcy from seeking the protection of the courts.




http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/07/04/BUJP1E7JK5.DTL&type=printable