|
SAVINGS, INVESTMENT & DEBT OWNERSHIP |
|
 |
 |
BANKRUPTCY
There are three major types of bankruptcies: Chapter 7 is a liquidation, under which assets are distributed by a court-appointed trustee. If there are no assets, the debt is discharged and creditors receive nothing. Chapter 11 is a reorganization, used mostly by businesses, under which debts are restructured and a payment schedule is worked out. Chapter 13 is a debt repayment plan, under which debts are repaid in part or in full over a period of time, normally three years, under the supervision of a trustee.
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCA), which was the most comprehensive revision of bankruptcy laws in 25 years, instituted a means test that requires people who earn above their state’s median income and can repay at least $6,000 over five years to file for bankruptcy protection under Chapter 13, which mandates a repayment plan. (Under the previous law more debtors were eligible to file under Chapter 7, with its less stringent provisions). There was a surge in filings in the months prior to October 2005, when BAPCA went into effect, followed by a precipitous drop in filings in subsequent months. Bankrupty filings in 2006 were down 70 percent from the previous year but rebounded in 2007, increasing by 38 percent.
| |
|
BANKRUPCTY PETITIONS FILED BY TYPE, 2003-2007
Year |
Business |
Percent change |
Nonbusiness |
Percent change |
Total |
Percent change |
| 2003 | 35,037 | -9.1% | 1,625,208 | 5.6% | 1,660,245 | 5.2% |
| 2004 | 34,317 | -2.1 | 1,563,145 | -3.8 | 1,597,462 | -3.8 |
| 2005 | 39,201 | 14.2 | 2,039,214 | 30.5 | 2,078,415 | 30.1 |
| 2006 | 19,695 | -49.8 | 597,965 | -70.7 | 617,660 | -70.3 |
| 2007 | 28,322 | 43.8 | 822,590 | 37.6 | 850,912 | 37.8 |
| Source: Administrative Office of the U.S. Courts. |
| |
| |
|
|
|
