BANKRUPTCY FILINGS SHIFTING FROM CHAPTER 7 TO CHAPTER 13
When people file for bankruptcy, they are generally trying to find a way to start over again and get out from under crushing debt. The U.S. Bankruptcy Code allows people to either liquidate assets to pay debts under Chapter 7 or set up a repayment plan under Chapter 13 in Las Vegas.
Although Chapter 7 allows people to be released from financial obligations more quickly, Chapter 13 may help protect a home or other major assets. According to Chapter 13 statistics, roughly 4.1 million, or 32 percent, of all bankruptcy filings logged over a 12-year period were filed under Chapter 13. Non-business filings, or those revolving around consumer debt, made up 99 percent of all Chapter 13 bankruptcy filings.
SHIFTING CAUSED BY CHAPTER 13
In 2005, Congress enacted the Bankruptcy Abuse Prevention and Consumer Protection Act. This act encourages people to shift from filing for Chapter 7 bankruptcy toward filing for Chapter 13 instead. Under this act, you can file for Chapter 7 bankruptcy only if your income falls below the state median for a comparable home or your disposable income fails a statutory means test. As a result, the following shifts have occurred.
- Although bankruptcy filings peaked after the last recession, Chapter 13 filings have since leveled off.
- Although not necessarily directly attributed to the Bankruptcy Abuse Prevention and Consumer Protection Act, Chapter 7 filings have decreased and Chapter 13 filings have increased during the last several years.
- Chapter 13 consumer bankruptcy filings were the highest in Southern states.
- In 2016, Alabama, Tennessee, Georgia, Louisiana, and Mississippi had the five highest rates of Chapter 13 bankruptcy filings.
- Nationally, one household out of every 405 households filed for Chapter 13 bankruptcy.
Crushing financial debt is a serious problem. People who find themselves buried under debt with little hope of recovery may want to consider filing for bankruptcy as a way out. By seeking bankruptcy protection, individuals can be given the opportunity to start over again financially and make better decisions for a brighter future.