It has been approximately six months since the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 went into effect on October 17, 2005 .  Since consumers and attorneys alike were uncertain as to the implications of the new legislation, there was a significant increase in bankruptcy filings just prior to the effective date of the new legislation. 

Nationally, bankruptcy filings in 2005 surged with an increase of 40% to 50% over the prior year. However, as anticipated, the number of filings since the new legislation has been drastically reduced.  Bankruptcy filings in 2006 are down more than 70% when compared to the number filed for the same time period last year.  The total number of filings for all of 2005 was over 1.5 million.  

Chapter 7 filings have shown the greatest reduction when compared to 2005. The new legislation was intended to steer consumers to file Chapter 13 proceedings and while those are down by as much as half from 2005, the percentage decrease is significantly lower than Chapter 7 filings.   

The great reduction in the number of filings appears to be the result of several factors.  First, the great number of filings that were made prior to the October 17, 2005 deadline.  Second, the uncertainty and unfamiliarity with the new bankruptcy legislation by many consumers as they perceive the new bankruptcy act will make it more difficult to file Chapter 7 bankruptcy proceedings as a result of the “means test” and other legislative changes.  Lastly, the cost of using an attorney for filing a bankruptcy proceeding has substantially increased since the new legislation went into effect, due to the increased investigative work and record keeping that now must be done by the debtor’s attorney to comply with the new statute.   

Additionally, as of April 11, 2006 , the fees for filing a bankruptcy petition will increase.  The fee for a Chapter 7 bankruptcy filing will increase from $274.00 to $299.00.  The cost of filing a Chapter 13 proceeding will increase from $189.00 to $274.00. 

With the increase in the cost of retaining an attorney to represent them in bankruptcy proceedings, the number of pro se individual filings, those consumers who have decided to file their bankruptcy petition without the benefit of counsel, has increased substantially.  Once of the most frequent pitfalls in obtaining the discharge is the failure of the consumer to obtain the necessary certificates showing that they obtained credit counseling prior to the filing of the bankruptcy and completed a personal financial management course. 

While there is currently a marked decrease in the number of bankruptcy filings, the Federal Reserve reported that consumer debt is still increasing with the total outstanding consumer credit debt rising 3.4% in January, 2006 and 1.8% in February, 2006. With the continued increase in consumer debt, coupled with the growing familiarity with the new bankruptcy legislation, it is anticipated that bankruptcy filings will gradually increase.  Hopefully, they will remain less than the staggering numbers of the last few years. 

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