Front page NYT article on the increasing number of personal bankruptcy filings:

The number of personal bankruptcy filings jumped nearly 8 percent in October from September, after marching steadily upward for the last two years, said Mike Bickford, president of Automated Access to Court Electronic Records, a bankruptcy data and management company.

Filings totaled 108,595, surpassing 100,000 for the first time since a law that made it more difficult — and often twice as expensive — to file for bankruptcy took effect in 2005. That translated to an average of 4,936 bankruptcies filed each business day last month, up nearly 34 percent from October 2007.

Let me remind you that this bill was pushed by the credit card industry — mostly based on claims that were factually inaccurate. Now, the same industry weasels who pushed this legislation thru are going back to DC begging for TARP money and a handout.

Question: How long before The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 act — a 1997 credit card industry drafted boondoggle, signed by President Bush — gets revised or even revoked?

The wide-opposed bill — dislike by consumer advocates, legal scholars, retired bankruptcy judges — was passed after the credit card industry spent more than $100 million lobbying for the bill. (See this Bloomberg video on Credit Cards and the TARP)



Downturn Drags More Consumers Into Bankruptcy
NYT, November 15, 2008

Update: November 17, 2008 12:32pm

Here is the same chart, only on a quarterly basis, via Calculated RIsk

Category: Economy, Legal, Wages & Income

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

25 Responses to “Personal Bankruptcy Rising”

  1. jmborchers says:

    This is a good sign (except for the lien holders). As soon as the consumers can restructure they can return to spending.

  2. Steve Barry says:


    This graphic looks good…did you fix that resolution issue? [BR: one of the many little tweaks happening behind the scenes.]

    JM: You are really trying too hard to spin any news positively…do you work at CNBC? Here is Saturday’s Page one NYT story: Tech Companies, Long Insulated, Now Feel Slump, ASHLEE VANCE, November 14, 2008

    The technology industry, which resisted the economy’s growing weakness over the last year as customers kept buying laptops and iPhones, has finally succumbed to the slowdown.

    In the span of just a few weeks, orders for both business and consumer tech products have collapsed, and technology companies have begun laying off workers. The plunge is so severe that some executives are comparing it with the dot-com bust in 2000, when hundreds of companies disappeared and Silicon Valley lost nearly a fifth of its jobs.

    October “was like turning a switch,” said Robert Barbera, chief economist at the Investment Technology Group, a research and trading firm. “Everything pretty much shut down.”

  3. BG says:

    IMO next year’s graph will look like the all too-familiar hockey stick out there for 2009 & 2010.

    The thing I keep reminding myself of is that… even if we go into a very serious global slow-down (that compares to the big one), we will still have the same ole talking heads on TV saying we need to do this or we need to do that.

    Auto traffic will be reduced. Lines at the grocery stores will be deminished. Discretionary retail outlets will have practically no customers. Bankruptcies will be reported on a daily basis…..Attendance on Sunday mornings will increase substantially.

    Eventually, the talk will lead to exhaustion and the media will quit reporting the bad news and start trying to get our attention onto other things no so dire.

    The sun will still rise just like today. Those things in our daily lives that we have grown to expect will still be there. At least those, we (so intelligent, “No Fear” Baby Boomers) have not yet screwed up.

    I wonder if staring into computer monitors for the last 20 years has created an artificial environment that we have incorrectly accepted as reality. I am afraid Reality is now upon us.

  4. Patrick Neid says:

    The bill was supported by President George W. Bush. Tom DeLay also championed the controversial legislation. The bill passed by large margins, 302-126 in the House[12] and 74-25 in the Senate[13], and was signed into law by President Bush.

  5. OkieLawyer says:

    This is something I know a little bit about; so let me interject something more for you to think about. If you look at the first graph, you will see that the spike in bankruptcy filings always happen in March and April (when people get their tax refunds back and use them to pay for bankruptcy services). October is a month when the business is usually trailing off. But what we see here is that business is continually climbing, regardless of time of the year.

    The real problem is not access to the bankruptcy court. The real problem is that wages and salaries for ordinary people cannot support basic sustenance. I well remember the US Trustees fully expecting bankruptcies to increase exponentially into 2010-2012 before the 2005 BAPCPA law was enacted. At the time, it was a great “business model.”

    Just remember, Barry (and others), that this law was the very first law enacted after the Republicans gained control of the US House, Senate and Presidency. They couldn’t wait to get this passed. It was passed through both houses of Congress without any amendments, review or debate.

    Compare this to the Chapter 11 provision that allows funds set aside for workers retirement and health care to be taken by corporate executives as “retention bonuses.” Why the working class isn’t out in the streets protesting is puzzling.

    But no matter what financiers do, the debt bubble was and is unsustainable. Look at the last graph above: besides Nevada, which can be attributed to gambling (not only in casinos, but also on housing speculation), the other states are all states that have been relatively unaffected by the housing / mortgage mess (maybe Georgia a little). They cannot be attributed to favorable exemption laws (like Texas and Florida).

    Three of those states are in what we traditionally call the South where wages are generally lower relative to cost of living and where workers receive fewer benefits such as health care.

    Also note that the largest increase came in “safer” secured debt — not in the uptick in unsecured credit card debt; this almost certainly came from mortgage debt related to overpriced housing. One thing that is not shown on the graph is the percentage of medical debt (which, when I left the bankruptcy practice, was the largest contributing factor in bankruptcies).

    That’s just my “back of the envelope” take on the information given.

  6. The facts show that the vast majority of bankruptcies were related to medical expenses and job losses. These arguments are supported by an in-depth study by Harvard University medical and legal scholars, which found that more than half of bankruptcies were attributable to unpaid medical bills.

    The claims made by the credit card industry were for the most part, inflated nonsense. The credit card industry is run by a group of highly self-interested weasels, and this bill is causing all manners of terrible hardships nationwide. Even worse, the same venal dogs who pushed this legislation thru are now going to DC begging for TARP money and a handout. What scum

    When people ask me if I am a Democrat, this is one of the reasons I have to say no. What a horrific bill, and everyone who voted for it is a filthy weasel who deserves to suffer the fate of bankruptcy — or worse. And if you are a Democrat who voted aye, you are a coward.

    If you voted for this terrible anti-consumer bill, you have earned the right to be despised by anyone in the middle class or lower.

    MarketWatch: Illness And Injury As Contributors To Bankruptcy.”
    Himmelstein, David U., Elizabeth Warren, Deborah Thorne, and Steffie Woolhandler. ”
    Health Affairs, February 2, 2005. Retrieved on April 12, 2007.

  7. larster says:

    Gov. for the rich, by the rich and only for the rich. Until the people wake up and vote the Reid’s, Shelby’s and McConnels out of office, this will continue. The only way to make them care is to make them want your vote more than the lobbyists money and perks.

  8. Blackhalo says:

    2005 must have been a good year for bankruptcy attorneys; 2006, not so much.

    I have known a couple of people who were, in my view, abusers of the bankruptcy process. They lived well beyond their means and when it caught up to them escaped the consequences, only to begin the process anew. As someone who has lived a frugal life by renting, paying cash for vehicles and carrying no credit card debt, I did not mind this bill so much.

    However, having heard that medical expenses are the number one cause of a bk and seeing the funny money the hospitals and insurance co’s push around after going through a surgery myself, I am appalled that such expenses are not exempted.

    To see the financial institutions that pushed for this bill with their hand out those who passed it, when they borrowed and lent more than they could afford is the height of hypocrisy.

    I guess Leona was right, “Only little people pay taxes.” Or go BK.

  9. dead hobo says:

    1) I believe that the new personal bankruptcy law made it preferable to file for debt elimination than for debt reorganization. It was probably an unintended consequence. The reorganization rules are far more complex than before. If they are complaining, it is probably due to their own lack of foresight.

    2) Free money is available for the best sad stories only. Ordinary sad stories need not apply. Since media manipulation is now a fundamental requirement of ‘getting the right story out’ , it can only be expected that terrible news is coming and will continue as long as billions of unaccountable dollars of cash can be had just for a good tear jerker. Media needs sad stories to sell advertising, so their inherent corruption will support the TARP thieves. Prediction: Just about everyone will fall for it, AGAIN.

  10. OkieLawyer says:


    About 5% of bankruptcies are of the “professional bankrupters” type (those that file every 6-7 years). Let me assert that if we had a national healthcare system, it would be easier to weed out those who abuse the bankruptcy court. By way of reference, one of the most quoted statistics by the Republicans and credit card companies prior to the change in the bankruptcy law stated that only 6% of bankruptcies were primarily caused by medical debts according to the US Attorneys Office. (And the same “study” asserted that credit card debt was the primary factor.) What they didn’t tell you is that the US Attorney’s office gets involved in a case almost exclusively when fraud or abuse of the bankruptcy code is involved. It would make sense then that medical bills were relatively rare and credit card debt featured so prominently. (To tell you why that is the case would probably run me afoul of Barry’s spam filters — as I learned from my first post above.)

    I hope this helps.

  11. Patrick Neid says:

    “When people ask me if I am a Democrat, this is one of the reasons I have to say no. What a horrific bill, and everyone who voted for it is a filthy a weasel who deserves to suffer the fate of bankruptcy — or worse.

    If you voted for this terrible anti-consumer bill, you have earned the right to be despised by anyone in the middle class or lower. And if you are a Democrat who voted aye, you are a coward.”

    You have hurt Joe Biden and Harry Reid’s feelings….

  12. Bruce in Tn says:

    Watched a group of state senators and reps this morning, early, discussing state budget cuts. Just a few months ago, the thought was that a 3% cut would suffice. This morning, all the participants are talking 7% and already had a preliminary list of firings and lay-offs at the Tennessee state level.

    The University of Tennessee is in for some of the biggest cuts, as they have been the last 24 months. There may be major changes to the dental and veterinary schools, and some of the less popular programs will be eliminated…(Again)..

    I also saw Carl Levin try to rationalize the reasons to bail out GM when Wagoner says he won’t resign, that is would not be the best thing for the company.

    Thomas Friedman says we need a new secretary of state who has training in bankruptcy proceedings, as that may be what many of the world contries go through the next two years…this was on Meet the Press this morning…

    Have a happy day….

  13. AJ says:

    Luckily, it will take a few years before this economic crises has been played out and at the end legislation affecting consumer finances will be unrecognizable compared to current. Credit card companies are among the expected casualties which is beneficial to the economy as predatory lending practices at the cost of the general public is not economically sound.

  14. Mike in Nola says:

    Even though I am a Democrat, I was pretty shocked at how many Dems voted for the bill. Omnia Romae venalia sunt.

    It’s not only retired judges that criticize the law. Don’t do bankruptcy myself, although I may learn again if the law is changed. Went to a CLE last year at which the District’s most senior judge spoke about the stupidity and unfairness of the current law.

    Steve Barry: While I respect your views and think you are long-term correct, you are beginning to sound a little like Bill Gross: always talking your book.

  15. Steve Barry says:


    I take offense to that…talking my book would be getting on CNBC and telling peoplet to buy stock in XYZ for this or that reason, when I own it…or Bill Gross saying the Fed needs to bail out Fannie and Freddie so he will make a fortune. I rarely tell anybody what to do. I have a strong long term view and I invested accordingly. What’s wrong with that? I said on 1/2/08 on this blog I thought this would be the worst year in S&P history and lookie here, we are right there. Is Roubini talking his book? So if I talk without actually investing, that is ok? I’m not an academic…I’m not going down with the ship. Would you prefer that I flip my message every week like some other commenters?

  16. babycondor says:

    “I wonder if staring into computer monitors for the last 20 years has created an artificial environment that we have incorrectly accepted as reality. I am afraid Reality is now upon us.”

    But you are staring into a computer monitor to read blogs like this. Hmmm.

  17. Mike in Nola says:


    Don’t mind you having strong views and voicing them. I think most everyone here knows it’s very bad and agrees with your overall view.

    It just seems you have taken Barry to task for not posting every bit of bad news instead of posting on a variety of subject affecting the economy. I’m not interested in absolutely everything Barry posts. I just don’t bother with those I’m not interested in instead of criticizing him for it. It’s the variety of articles that makes the blog interesting.

  18. Mike in Nola says:


    Did want to apologize for not taking your original post correctly. On rereading it, I see the criticism is of JM.


  19. E says:

    JM Borchers showed up around the same time cinefoz disappeared.

  20. Steve Barry says:


    Apology excepted…Barry can post anythng he wants on the blog obviously and anyone can opine on it. I took JM to task for spinning a horrible datpoint in a positive way…that is what I call talking your book depending on if you happen to be bullish or bearish that week.

  21. wunsacon says:

    [sarcasm]What do Joe the Plumber and Sarah Palin think about this problem? Can we talk about Terri Schaivo yet? What about the assault on marriage? I bet a white girl was abducted this week. Why aren’t we forming a search party?[/sarcasm]

    Barry, here’s a Warren presentation worth watching:

    JM Borchers and cinefoz write and think differently. I’d be very surprised if they’re the same people. And I do like the fact that Borchers thinks independently.

    If we say someone’s “talking their book”, we’re suggesting s/he has a motive for presenting their opinion beyond their earnest belief in what they wrote in the book. Maybe I’m naive. But, I just don’t see anyone on here doing that.

  22. VennData says:

    For anyone who believes short term changes in capital gains taxes effect the take in the long run look at that chart. People react to the impending change, then things revert to mean. Capital gain tax proselytizers refuse to look at the actual data.

    As for the 2005 industry-written BK laws, as we undo one Bush-era own-goal after another, I wish someone would keep count.

  23. hpov2000 says:

    I am not sure why, but my understanding is that Cinefoz has reincarnated as “dead hobo”.

  24. KJ Foehr says:

    I don’t understand why Barry blames the Dems for this.

    “The increase in Republican majorities in the Senate and House after the 2004 elections breathed new life into the bill, which was introduced in its current form by the chairman of the Finance Committee, Republican Senator Chuck Grassley of Iowa.[11] The bill was supported by President George W. Bush. Tom DeLay also championed the controversial legislation. The bill passed by large margins, 302-126 in the House[12] and 74-25 in the Senate[13], and was signed into law by President Bush.”

    Sure some Dems voted for it, but it looks like, and I always assumed it was, a Republican backed initiative. No?

    Why blame only the Dems?