A recent Wall Street Journal article titled, “Personal Bankruptcy Filings Rising Fast” from Tuesday, January 5, 2010 discusses the state of bankruptcy filings in the United States. The article indicates the number of Americans filing for personal bankruptcy rose by nearly one-third in 2009. The reason for the increase in bankruptcy filings is related to foreclosures and job losses. The Wall Street Journal reports that personal bankruptcy filings hit 1.41 million in 2009 which is up 32% from 2008. This number is the highest level of consumer bankruptcy filings since 2005. 2005 is significant because many individuals raced to file bankruptcy before the new bankruptcy laws took effect in October 2005. The new bankruptcy laws instituted in 2005 were an attempt by Congress to make it more difficult for people to eliminate their debt through a Chapter 7 filing and encourage a Chapter 13 filing. However, the state of the economy is hampering the effectiveness of the bankruptcy law.

Institution of the Means Test in 2005 has not curtailed the filing of a Chapter 7 bankruptcy. The Means Test was established to separate those who could afford to repay their debt from those who could not. However, the recession that has been crippling the economy has largely curtailed the purpose of the Means Test which was to force debtors to file for a Chapter 13 bankruptcy and enter into a debt repayment plan. The state of the economy in the United States has caused many more people to file for bankruptcy than was anticipated by the drafters of the new bankruptcy law in 2005.

The article can be found at the folllowing web address:

online.wsj.com/article/SB126263231055415303.html