Chapter 7 Success Lawyers Chicago - Bankruptcy Filings Rise
Bankruptcy Filings Rise

Chapter 7 bankruptcy filings continue to rise despite the attempts of creditors to force more debtors into Chapter 13. We knew that it was inevitable; at least those of us who represent debtors for a living. The fact is that the overwhelming majority of debtors are in need of a fresh start under Chapter 7 of the US Bankruptcy Code. The Congress cannot mandate debtors to repay their debts in a Chapter 13 bankruptcy case if they don’t have the ability to fund a plan. To curb bankruptcy filings, the lenders must look inward and limit their lending to those that are not credit-worthy.

Although the filing levels are not anywhere near to pre-reform levels, there are indications that filings will return to that level eventually. The filing statistics have shown that there are increases will each and every passing month. The top has not been reached by any stretch. If the economy continues to fall and homes continue to be lost, there will be a spike in Chapter 7 bankruptcy cases within the next three years. It will be interesting to see if any of the current legislation passes. That legislation will allow debtors to modify the loans that are attached to their principal residence. This is something that currently cannot be done. The sub-prime mortgage foreclosure crisis is the impetus for such proposed legislation. If this were to pass, there would be a spike in Chapter 13 bankruptcy cases. This fact, coupled with the rise in Chapter 7 cases, could cause the credit and lending industry to questions whether or not their efforts were fruitful.

The bottom line is that the credit issuers cannot have their cake and eat it too. They profit from overzealous lending. They cannot stop people from filing Chapter 7 bankruptcy if they truly do not have the ability to pay.

Back to Articles