NEW YORK, NY -December 7, 2006. According to Richard E. Weltman, a pre-eminent bankruptcy lawyer with offices in New York and New Jersey, 2006 bankruptcy filings nationwide are down from one year ago, although there is some indication the trend may reverse in first quarter 2007 as a result of rising interest rates on adjustable-rate mortgages, among other factors.
Weltman cited figures just released by Commercial Law League of America for fiscal year 2006--ending September 30, 2006-showing the number of bankruptcy cases filed nationally dropped by 37.6% overall, with 1,112,542 total cases reported, in comparison to the previous 12-month period
"There is no question BAPCPA had the desired effect of making bankruptcy more difficult for many prospective filers," Weltman stated. "While there may be additional hurdles, an experienced bankruptcy attorney understands the new rules, and knows how to help those truly in need."
Despite the reductions, Weltman noted the need for some individual and business debtors for creditor relief "seems to be spiking again" due to higher interest on adjustable rate mortgages and a slumping real estate market. Yet 2006 filings remain down substantially from the 1,782,643 total cases filed in fiscal 2005 and 1,618,987 total cases filed in fiscal 2004.
"It is no coincidence that the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) became effective just over a year ago on October 17, 2005," Weltman said. Certain provisions of BAPCPA such as those limiting homestead exemptions became effective six months' earlier, upon President Bush's signing the controversial bankruptcy reform bill in April 2006. The new law had been debated in Congress for nearly 10 years.
Weltman observed that consumer filings have been impacted "by the most sweeping bankruptcy reform in a generation," due largely to the new median income test, changes in the real property exemption, and closer scrutiny of claimed household expenses in consumer cases.
"It is now easier for creditors to challenge abusive filings, and this helps level the playing field in the most extreme cases," Weltman said.
Chapter 7 filings-routinely known as liquidation cases--dropped sharply in fiscal 2006 to 833,147 new filings, down 38.1%. Chapter 13 payment plan cases, encouraged under the revised bankruptcy law, totaled 272,937 cases in fiscal 2006, dropped slightly less, or 36.4% from the prior period.
Non-business/personal bankruptcies fell 37.9% in fiscal 2006, from 1,748,421 cases reported in fiscal 2005 to 1,085,209 new cases reported.
Business bankruptcies for fiscal year 2006 fell 20.1%, from 34,222 filings reported in fiscal year 2005 to 27,333 new filings. Chapter 11 reorganizations in fiscal 2006 fell the least during the same period, to a total of 6,003 new cases for fiscal 2006, down 9.6% from similar filings reported in fiscal 2005, according to the recently released CLLA report.
"Whether filings in the new year go up or down, the changes to the bankruptcy rules are comprehensive, complex and non-intuitive," Weltman stated. "A party caught up in a bankruptcy case in any capacity-and particularly one being targeted by a bankruptcy trustee-would be well served to seek out a skilled bankruptcy professional at the earliest possible date."
About Richard E. Weltman
Richard is a partner at Weltman & Moskowitz, LLP. He practices in the areas of bankruptcy and creditor and debtor rights, and is also an experienced litigator and trial attorney concentrating on business, construction and bankruptcy disputes. His clients include federal credit unions, sales and service companies, building contractors, real estate owners, developers and managers, professionals and professional practice groups, oppressed shareholders, various debtor, vendor, creditor and equity interests affected by all varieties of bankruptcy matters, as well as individuals. Richard can be reached at 212.684.7800 or 201.794.7500, or by email.
