Bankruptcy filings in the past few weeks have spiked to record highs as consumers rushed to file before a new, more stringent bankruptcy law takes effect on Monday, Oct. 17.
For the week ending Oct. 8, bankruptcy courts reported a total of 102,863 filings, up from the previous record high of 68,387 the week before, according to data from Lundquist Consulting. Year-to-date, the number of filings has grown 19.4 percent compared with the same period in 2004.
Based on preliminary data, Lundquist researchers are expecting to see more than 200,000 personal bankruptcy filings for for the week ending Oct. 15, said Jane Truch, senior manager of research and analytics at Lundquist.
On a daily basis, the increase has been dramatic. There were more than 20,000 filings per day on average in the week ending Oct. 8, up 54 percent from the week before, and almost triple the number of daily filings in August.
That has meant a heavy caseload for bankruptcy attorneys, and a crush of filings in bankruptcy courts.
“The ones in my practice tell me they’re absolutely buried,” said John Penn, president of the American Bankruptcy Institute and a partner in the Texas firm of Haynes and Boone.
Starting Oct. 17, it will be harder for individuals to file for bankruptcy under Chapter 7, which would let them clear their debts and get what’s known as a “fresh start.” The law makes it more likely that they must file under Chapter 13, which requires debtors to repay at least some of their debts within five years. It’s fair to assume that the rush of late filers in the past few weeks are mostly those who would like to file for Chapter 7, Thompson said.