Posts filed under “Legal”

How Has the Bankruptcy Act Affected Bankruptcy Filings?

How Has the Bankruptcy Act Affected Bankruptcy Filings?
By Juan M. Sánchez, Senior Economist

 

 

bankruptcy

©Thinkstock/bobbushphoto

 

It is well known that the number of non-business bankruptcy filings increased dramatically during the ‘80s and ‘90s. This period has been referred to as the “revolution in consumer credit and consumer bankruptcy,”1 as the number of Chapter 7 bankruptcy filings increased more than fivefold from 1983 to 2004. This process, which is associated with the decline in the cost of information,2 ended with the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005. In short, BAPCPA made bankruptcy filings more costly and more limited to low-income households. We focused on the evolution of the number of bankruptcy filings after the BAPCPA.

The figure below presents data on Chapter 7 and Chapter 13 bankruptcy filings for debt associated (predominantly) with non-business activity. Since the most recent information available is for the third quarter of 2014, the chart includes data for the third quarter of every year since 2001.

bankruptcies

The figure shows two interesting patterns:

  • Chapter 7 filings increased dramatically in anticipation of BAPCPA.
  • Chapter 7 filings, and to some extent Chapter 13 filings, increased during the recession and have now been declining for four consecutive years.

The fact that bankruptcy filings have been declining while employment has been increasing should not be a surprise, since research has shown that bankruptcy filings follow fluctuations in the labor market quite closely.3

BAPCPA clearly had an impact on the number of bankruptcies being filed. However, the exact impact may not be known for some time, since the recession hit right after the BAPCPA was implemented.

Notes and References

1 Moss, David; and Johnson, Gibbs. “The Rise of Consumer Bankruptcy: Evolution, Revolution, or Both?,” American Bankruptcy Law Journal, Spring 1999, Vol. 73, Issue 2, pp. 311–351.

2 Sánchez, Juan M. “The IT Revolution and the Unsecured Credit Market,” Federal Reserve Bank of St. Louis Working Paper 2010-022B.

3 Athreya, Kartik; Sánchez, Juan M.; Tam, Xuan S.; and Young, Eric R. “Labor Market Upheaval, Default Regulations, and Consumer Debt,” Federal Reserve Bank of St. Louis Working Paper 2014-002C.

Additional Resources

Category: Legal, Think Tank

The Russian Laundromat

Source: OCCRP From OCCRP: Call it the Laundromat. It’s a complex system for laundering more than $20 billion in Russian money stolen from the government by corrupt politicians or earned through organized crime activity. It was designed to not only move money from Russian shell companies into EU banks through Latvia, it had the added…Read More

Category: Crony Capitalists, Currency, Digital Media, Finance, Legal, Politics

Tracking Inside Info in ‘Fight Club’ Ring

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Category: Digital Media, Legal, Really, really bad calls, Trading

Big Banks Manipulate Physical MarketsPrices

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Category: Bailouts, Legal, Think Tank

Currency Markets Are Rigged

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Category: Currency, Gold & Precious Metals, Legal, Think Tank

TDS: Money is the Big Winner of 2014 Midterms


Jon Stewart election 110414 by lookatmyshirt

Category: Finance, Legal, Really, really bad calls, Video

John Oliver: State Legislatures and ALEC

While midterm coverage is largely focused on the parts of Congress that do very little, vital (and bizarre) midterm elections are going unexamined. State legislators pass a lot of bills, and some of that efficiency is thanks to a group called ALEC that writes legislation for them. It’s as shady as it sounds!

 


 

via John Oliver, HBO

 

 

Category: Legal, Politics, Really, really bad calls, Video

Find a financial adviser who will put your interests first

Find a financial adviser who will put your interests first Barry Ritholtz Washington Post, October 26 2014       Today’s column is going to be on the wonky side, but stay with me — it is very important stuff. For investors seeking some help, it can be crucial. If you want financial advice, there…Read More

Category: Apprenticed Investor, Investing, Legal

Exporting Corruption

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Category: Corporate Management, Legal, Politics

Why There Are Two Standards for Financial Advice

> My Sunday Washington Post Business Section column is out. This morning, we look at the various legal standards of care financial advisors must adhere to. The print version had the full headline Why Two Standards for Financial Advice? while the online version was Find a financial adviser who will put your interests first. As I…Read More

Category: Finance, Investing, Legal