Filings up 30 percent from 2004

3/25/2006

Personal bankruptcies soared 30 percent nationally to a record high last year as financially strained people rushed to file before new restrictions took effect Oct. 17.

But the pace paled compared with northwest Ohio, where filings were twice the national level.

Bankruptcy petitions filed in federal courts across the country totaled 2,039,214 in 2005, up from 1,563,145 in 2004, the Administrative Office of the U.S. Courts said yesterday.

For the 21 counties covered by the U.S. Bankruptcy Court in Toledo, cases rose to 16,883 last year from 10,623 the year before, establishing a record for the fifth consecutive year.

Many of the extra filings were attributed to a new law that made it more difficult and expensive to file for protection from creditors. Prior to the law's enactment, filings nationally were stable, but in the Toledo area were on a pace far exceeding the year before.

The law bars those with above-average income from Chapter 7 - where debts can be wiped out entirely - except under special circumstances. Those deemed by a new "means test" to have at least $100 a month left over after paying certain debts and expenses must file instead a five-year repayment plan under the more restrictive Chapter 13.

The new figures showed that last year there were 1,631,011 personal bankruptcy filings nationally under Chapter 7, up from 1,117,766 in 2004. Chapter 13 filings declined to 407,322 from 444,428.

In northwest Ohio, Chapter 7 filings rose 66 percent last year and Chapter 13 cases were up 3 percent.

Nationally, in the final quarter of the year, which included the two weeks preceding the Oct. 17 reform law enactment, Chapter 7 cases ballooned to 560,654 from 254,518 in the same period the year before. Chapter 13 filings fell to 93,714 from 109,116.

The huge surge before the new law produced a near-absence of filings afterward. Filings for November and December declined to a mere fraction of what they had been a year earlier, nationally and locally.

Last year, California had the biggest volume with 166,768 filings, up 36 percent from 2004. Ohio was second with 135,640 filings, up 51 percent. Texas had 121,202 filings, up 29 percent.

A group representing bankruptcy attorneys contended in a report last month that the law has failed to stop abuses and has stymied people who have legitimate reasons to file for bankruptcy.