Bankruptcy Repeat Filings: A Busy 2013?

Bankruptcy Filing History

When George W. Bush signed the Bankruptcy Abuse Prevention and Consumer Protection Act (“BAPCPA”) into law in April, 2005 panic beset the bankruptcy community. Many bankruptcy lawyers feared that BAPCPA would severely limit the rights of debtors under the Bankruptcy Code. Even worse, nobody knew what impact many of BAPCPA’s new restrictive features would have on debtors in the real world.

As a result of this panic, between October 1 and October 17, 2005 bankruptcy lawyers filed more than 600,000 cases for their clients under Chapters 7 and 13. There has never been a busier time for filing bankruptcy cases in US history. In contrast, only about 20,000 Chapter 7 cases were filed in the following 10 weeks.

In recent years the national recession and the real estate crash have caused bankruptcy filings to rise to normal pre-BAPCPA levels. The news in the bankruptcy community however is that filings are poised to drop significantly from peak recession figures. According to this Boston Globe article, bankruptcies filed by individuals fell 13 percent in the first half of the year and are down nearly 20 percent over the past two years nationwide.

However, one of the BAPCPA changes may have a significant impact in 2013 filings, when the new waiting period between bankruptcy filings expires. Pre-BAPCPA debtors could obtain discharges in bankruptcy every 6 years. Under the new law, the waiting period for discharges in multiple Chapter 7 cases is expanded to 8 years, as described in this article.

Both pre- and post- BAPCPA the statistics on bankruptcy recidivism are more or less the same: just over 16% of filers will seek a second discharge in bankruptcy. This means that bankruptcy professionals should be ready for a mini-spike in bankruptcy filings after October 2013, when the bankruptcy world celebrates the eighth anniversary of BAPCPA becoming the law of the bankruptcy land.

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