Blog sponsored by Bankrupt-Law.com


9/11/2006 - Special to The OBSERVER

BUFFALO - With consumers feeling the squeeze of increased interest on
adjustable rate mortgages and high energy prices, the drop in bankruptcy
filings resulting from last year's change in the bankruptcy law may soon
become a thing of the past.

According to Jeffrey Freedman, senior partner of Jeffrey Freedman Attorneys
at Law, while it is true that national statistics on consumer filings for
the 12-month period ending June 30 of this year totaled 1,453,008, showing a
9.5 percent drop compared to 1,604,848 filings during 12-month period ending
June 30, 2005, a look at the second quarter of 2006 tells a different story.

When compared to the first quarter of 2006, the second quarter showed a 53.5
percent increase in filings, a total of 85,449, compared to 55,671.

Locally there was a 3.34 percent decrease in filings for the 12-month period
ended June 30 of this year compared to the previous year, and a 68.8 percent
increase in filings during the second quarter of 2006 compared to the first.

"The new law did not address the root causes of bankruptcy - job loss and
catastrophic medical expenses," said Freedman. "The dramatic decreases in
filings that we saw at the beginning of the year were the result of people
who probably would have filed months down the road but rushed to file before
BAPCPA (Bankruptcy Abuse Prevention and Consumer Protection Act) took
effect."

John Rao, a staff attorney at the National Consumer Law Center, said he
believes filings will begin to increase during the last two quarters of this
year and will be back to 2004 levels next year.

"As John says, many people saw a headline or one or two sentences about the
new law and thought they could no longer file Chapter 7," Freedman said.
"That perception is changing."

Economic factors including the cost of gasoline, mortgage interest rates and
the burst of the housing bubble are creating more reasons for people to need
bankruptcy protection, reported Henry J. Sommer, editor in chief of Collier
on Bankruptcy and president of the board of the National Association of
Consumer Bankruptcy Attorneys.

"For some, it's really going to be a question of when they file rather than
if they file," Freedman said. "There are many reasons people will need to
file and the new rules can only put these people in the position of waiting
longer than they should to do it."

According to a study by Lundquist Consulting which tracks bankruptcy trends,
with the increased cost of filing, debtors are becoming too poor to file.
One factor is that debtors are now required to take and pay for
credit-counseling sessions before and after filing bankruptcy.

Credit card companies lobbied for BAPCPA because they wanted higher income
individuals to have to pay back at least part of their debts in Chapter 13
plans, however the people who have been most affected by the law are low
income, according to Henry Sommer, with Lundquist Consulting. He said this
is particularly true for regions where there is a weak economy.

"We have a lot of people who make minimal incomes and a lot of older folks
on fixed incomes in this area," Freedman said. "Those people are being
pinched by the rising cost of living so they end up over-extended, and then
they get to a point where they can no longer tolerate the collection tactics
of the credit card companies and other lenders."

Jeffrey Freedman Attorneys at Law has 15 offices throughout Western New
York, handling bankruptcy, social security disability, and personal injury
cases. The firm was founded in 1980.