Total Bankruptcy

A new report by the Federal Deposit Insurance Corp. indicated that the number of people in Tennessee who filed bankruptcy during the first quarter of 2008 was more than twice the national average.  More people in Tennessee are filing bankruptcy than in any other state in the country although the number of people filing bankruptcy is up more than 25 percent nationwide.

Across the country, during the first quarter of 2008, three out of 1,000 people filed bankruptcy.  In Tennessee, more than six people per 1,000 filed bankruptcy in the first quarter.

WorldNow News reported that although Tennessee leads the nation in filing bankruptcy, it also leads the nation in Chapter 13 bankruptcy, which allows debtors to pay creditors back according to a schedule.

Despite the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) that went into effect on October 17, 2005, the number of consumers and businesses filing bankruptcy is on the rise.  BAPCPA increased the fee to file bankruptcy and placed tighter limits on the income of those who are filing bankruptcy, but aside from a brief decrease in bankruptcy filings at the end of 2005, has done nothing to slow down the number of people and businesses who find that filing bankruptcy is their best option.

According to data from the National Bankruptcy Research Center, U.S. consumer and business bankruptcy filings were up by 30.9 percent nationwide in May as compared to the same time period a year ago.  The overall number of people filing bankruptcy is still lower than in 2006 when 1.8 million people filed bankruptcy, but with the nation's poor economy and the sharp rise in food and gas prices record numbers of consumers and businesses may soon be considering filing bankruptcy.

For more information read:  Filing Bankruptcy is an Increasingly Popular Option

The tough outlook for the economy has made many consumers feel the ill effects and caused them to make many changes in their day-to-day life.  But according to new figures made available, via Bloomberg.com, many aren’t quite ready to give up the affluent lifestyles to which they have grown accustomed.

According to these statistics, U.S. consumer borrowing more than doubled what was forecast for the month of March.  Instead of the $6 billion that economists predicted for the month, consumer credit leapt to $15.3 billion.  Compare that to February, in which credit rose by $6.5 billion, and you’ll note the severity of the swerve upward.  It marks the last month in a quarter that saw consumer credit as a whole rise by $34 billion, the most since the first quarter of 2001, which was not coincidentally the last recession into which the U.S. entered.

Experts point to new, tightened lending standards for home-equity loans as one culprit—in addition to the general recession—that is causing consumers to turn to credit in credit cards and the like.  With home prices dropping and potential to drop many more percentage points in the upcoming months, perhaps this latest shock will force economists to adjust their predictions in the second quarter and beyond.

For more on credit and foreclosure, visit the articles section at Total Bankruptcy.

In order to stimulate the economy out of the current recession, Ben Bernanke and the Federal Reserve Board cut the federal funds rate once again, slashing another quarter percent off to bring the rate to 2.0%.

Of course, monthly reports published recently prove that the US is technically not in a recession—still, consumer confidence is low, and a little jump start may prove useful to spurring consumers to purchase loans once again.  (Unlike when they cut the rates six weeks ago, or last September...)

In the meantime, read Total Bankruptcy's handy guide to What the Interest Rate Cuts Mean for You.

The economic stimulus package passed by Congress should be rolling out in the coming weeks, now that income taxes have been filed. Here's when you can expect your rebate check:

For more information about the tax rebates, check out this article.

Amidst concerns about student loan availability and affordability during the credit crunch, the House of Representatives has approved a measure that would allow the Department of Education to purchase federally guaranteed loans that lenders cannot sell to private lenders and also increase the amount of money that students can borrow.

Just yesterday, Bank of America was the latest in a long line of lenders who said that they will no longer make private student loans available as a result of the credit crunch and a lack of financial backing in such asset-based securities from investors.

According to estimates from the Education Department, nearly 7 million borrowers will require more than $68 billion in federal loans this academic year.

The AP is reporting that consumer confidence has reached its lowest point since the RBC Cash Index began recording the phenomenon in 2002.  Currently, the index is at 29.5, dropping from its March level of 33.1.

The RBC Cash Index is a monthly survey of consumer spending and the future and current state of economies.  It is released during the first week of each month.

The issue of "Zombie Debt" has seemingly been getting a lot of coverage in the mainstream media over the last several months. A recent ConsumerAffairs.com story detailing how Luebke Baker has been recently attempting to collect alleged magazine subscription debts from as long as 11 years ago in some cases further depicts  the need to be aware of such deceptive debt collection practices and to protect yourself as a consumer.

Give the above ConsumerAffairs.com story a read and then be sure to check out our detailed pages on debt collection practices:

• Debt Collection;

• Dishonest Debt Collectors; and

• Could You Be Paying Debts You Don't Owe?

An obvious purpose and focus of The Bankruptcy Blog is to examine how consumers fall into debt, how filing bankruptcy may be able to help them attain a fresh financial start, and how debtors can establish healthier financial practices after filing.

With that in mind, Bankaholic recently provided an interesting post earlier this week on 8 Easily Avoidable Causes of Business Debt.

Just as we track business bankruptcies and mass layoffs updates at Total Bankruptcy -- because such events may impact employees and can cause unexpected and burdensome financial stress that prompts filing bankruptcy -- the Bankaholic post does an effective job of examining some reasons why businesses may fail and how employers can avoid such pitfalls.

Give the post a look -- it's worth the read.

Government reports show that we lost 63,000 jobs in February.  It's the largest falloff in that sector in five years.  Expect bankruptcy filings to go up again.  When does the word "recession" come in to play in earnest?

Update: Via the Freakonomics blog, proof.  And more support at Krugman in NYTimes.

The US Federal Reserve Bank announced a lowering of the interest rate for federal funds, meaning the rate banks charge one another for overnight loans.  The rate will be lowered from 4.25 to 3.5.  This is the third interest rate cut since last September, when the bank cut the interest rate by a half-point, and then quarter-points in October and December.

The decision, made in an emergency phone meeting of board directors, comes on the heels of a dramatic drop in stock markets worldwide on the slowdown of the US economy and fears over continuing losses there.  The rate was cut before the stock market opened today in hopes of halting or at least slowing this worldwide plunge.

Total Bankruptcy is your source for financial news affecting bankruptcy, loans, foreclosure and other related topics.  Check out our articles section for the latest bankruptcy and lending articles!

The Chicago Daily Herald reports that a merger of Bank of America and LaSalle Bank will cause 2, 500 layoffs in Chicago and 1,500 in Michigan. North Carolina’s Bank of America is expected to complete its $21 billion purchase of LaSalle, the second largest bank in the Chicago area.

Scott Silvestri, spokesman for Bank of America, said the layoffs of redundant workers will begin in the first quarter of 2008. Last month, the consulting firm Anderson Economic Group estimated as many as 10,500 people in the Chicago area could be laid off. The Group predicted the economic impact on the area could reach $780 million by 2009.

Monday’s announcement may have come as a relief to thousands of LaSalle Bank employees. Now they just have worry about which employees should actually be relieved.

Good news … The Federal minimum wage is increasing today, for the first time in 10 years. Bad news … The Federal minimum wage still does not even come close to enough money to raise a family.

The Federal minimum wage increases today, from $5.15 per hour to $5.85 per hour. Based on the standard minimum wage work week of 35 hours, someone working 52 weeks a year would gross $10,647. Rarely will a minimum wage worker receive benefits. A two earner family, both working minimum wage jobs would earn $21,294 in gross earnings. Of course, FICA must be paid from all wages, reducing the couple’s net earnings to about $19,700, assuming no payment of income tax.

Unfortunately, the poverty line for a family of four in 2007 is $20,650 for the lower 48 states. Federal Register, Vol. 72, No. 15, January 24, 2007, pp. 3147–3148. So, two parents earning minimum wage, with two children, must still need to rely on additional government support programs.

Why, you may ask, is the Federal poverty line apparently wrong? The calculation is no longer accurate. In 1963, Mollie Orshansky, of the Social Security Administration, developed a simple formula to calculate the minimum income needed for a family: The cost of the U.S. Dept. of Agriculture economy food plan for a family multiplied by three. At the time, food was about one third of a family’s spending.

Orshansky’s formula may have been fairly accurate in 1963, but it doesn’t work in 2007. Due to increases in the cost of housing, health care, fuel, etc., food is now much less than one third of family’s expenses. If food accounts for as much as 20 percent of a family’s spending, the poverty line for a family of four would be $34,416. (Based on the Government’s poverty line for 2007). The poverty line is 40 percent too low.

By 2009, the minimum wage will be $7.25 per hour. The two minimum wage earner family would be grossing $26,390 or netting about $24,400, still well below a realistic poverty threshold.

Many states currently have their own minimum wage laws, ranging from states that match the Federal level of $5.15 per hour to Washington which as minimum wage of $7.93 per hour.

In the confusing sea of paperwork transferring mortgage notes from lender to holder to securitized pool, many consumers aren't at all sure exactly which entity owns their mortgage notes, or how one entity is related to another.  The surprising news that's working to the advantage of many homeowners facing foreclosure is that the mortgage lenders and note holders may not know, either.

Florida attorney April Charney, Forbes magazine tells us, noticed that a lot of the mortgage foreclosure cases she saw involved affidavits of lost notes. An affidavit of lost note is essentially a sworn statement that says, "we own this debt, but we can't find any paperwork to prove it, so please just take our word for it".  A bit of investigation revealed that in many cases, the paperwork didn't exist, or originated at the wrong time, or conflicting interests had been recorded.  In some cases, notes had been illegally purchased by pools after they were already in default.

These flaws can bring a mortgage foreclosure action screeching to a halt; Forbes reported on one such homeowner who is still in residence five years after foreclosure actions were commenced.

If you're facing foreclosure, don't assume the worst. Get the professional help you need to untangle the paper trail and find out whether you have valid defenses in a forecosure action.

Planned U.S. layoffs rose in May by 0.6 percent, led by downsizing in the computer industry. An increase of 0.6 percent may not sound like much, but it means that another 71,115 workers are a step closer to bankruptcy.

Challenger, Gray & Christmas, an employment consulting firm, said planned layoffs in May had increased from 70,672 in April. May’s job cuts were up 32 percent from May 2006. So far this year, a total of 337,773 jobs cuts have been announced. That’s 8.5 percent fewer than in the same period last year.

Dallas Texas’ Dell Computers has announced it will lay off more than 8,000 employees over the next year as part of an ongoing restructuring. Losing a job is a leading cause of filing for Chapter 7 or Chapter 13 bankruptcy.

Dell claims it needs to lay off thousands employees due to falling earnings. Dell said it earned $759 million (34 cents per share) in the first quarter of this year, compared with $762 million (33 cents per share) during the same quarter last year.

Dell has also announced it will abandon its long-standing business model of only selling machines direct to customers. Dell plans to start selling computers at Wal-Mart stores.

California-based subprime mortgage lender New Century has filed for bankruptcy protection, and announced plans to immediately terminate 3,200 employees.  If the bankruptcy court gives its approval, New Century will sell its loan servicing business to Carrington Capital Management.

More than two dozen subprime lenders across the country have shut down in the past several months, and New Century will likely not be the last.

National Urban League President Marc Morial tied homeownership to personal wealth, greater economic empowerment, and closing the gap between blacks and whites in the United States when he described six major policy recommendations designed to minimize obstacles standing in the way of many Americans owning their own homes.

The obstacles the National Urban League Homebuyer's Bill of Rights seeks to overcome are:

• lack of net savings for downpayments and closing costs
• lack of information on how to shop for homes and apply for loans
• lack of quality affordable units in livable locations; and
• lack of consumer protection

The National Urban League Homebuyer's Bill of Rights makes six policy recommendations designed to overcome these obstacles:

1. The Right to Save for Homeownership Tax-Free
2. The Right to High-Quality Homeownership Education
3. The Right to Turth and Transparency in Credit Reporting
4. The Right to Production of Affordable Housing for Working Families
5. The Right to be Free from Predatory Lending; and
6. The Right to Aggressive Enforcement of Fair Housing Laws

Some time ago, we wrote about the movie Maxed Out and how it had exposed the seedy underbelly of the consumer credit industry in the United States.  Since that time, various governmental agencies and committees have conducted hearings and issued reports affirming this basic principle:  Debt is a growing problem in the United States.  The practices of the consumer credit industry are, without question, a part of the problem. 

Mainstream media outlets such as 20/20 and PBS NOW have recently produced shows on aspects of this problem, and Harvard Law Professor Elizabeth Warren, an expert on consumer debt, is becoming a familiar face.  Maxed Out helped turn that spotlight on the debt problem.

At long last, the movie is appearing in selected theaters across the country.  For a screening near you, check here:  Maxed Out Screening Dates and Locations

The average credit card debt for Americans between the ages of 65 and 69 rose 217% between 1992 and 2001, and experts suggest that this trend is part of the reason for an increase in bankruptcy filings among the elderly. The National Consumer Law Center (NCLC) issued a report in 2006 suggesting that older Americans are using credit cards as a "plastic safety net" in the face of incomes not keeping pace with the cost of living, higher housing costs and out of pocket medical expenses, and rising property taxes. NCLC also suggests that creditor practices, including dishonest marketing, punitive fees, penalty rates, and change-in-terms provisions lead to escalating indebtedness and, in some cases, bankruptcy.

About half as many bankruptcy filings occurred in western Tennessee in 2006 as in 2005. 2,877 bankruptcies were filed under Chapter 7 in 2006, compared with 10,995 in 2005. A closer look at the numbers show that bankruptcy filings didn’t go down because of an improved economy, but rather due to the new bankruptcy laws.

According to the American Bankruptcy Institute, just before the new bankruptcy law took effect in October 2005, there was a huge spike in Chapter 7 filings. Following October, there was a substantial decrease in filings. “There wasn’t anything left. The pipeline had been pulled forward.”

Other aspects of filing for bankruptcy may also be dampening enthusiasm for bankruptcy filings:

A Memphis bankruptcy lawyer said he believes that some people think “there is no bankruptcy any more.”

The cost of filing a Chapter 7 bankruptcy in Memphis increased from $200 to $299. Memphis bankruptcy lawyers have increased their fees for a Chapter 7 filing from about $600 to $850 to $1,100.

The requirement for credit counseling before filing a bankruptcy has deterred some potential filers.

The means test, barring some people from filing under Chapter 7 bankruptcy, has scared some people away. The means test requires some filers, who have the ability to pay back some of their debt, to file under Chapter 13.

PBS NOW broadcast an interview with Harvard Law Professor Elizabeth Warren this week.  Professor Warren described her recent study as one of those situations where she and her colleagues were "knocked over by our own research". 

Warren reports that half of all bankruptcies occur in the aftermath of a serious medical problem. 

You can listen to the broadcast at http://www-tc.pbs.org/now/rss/media/news-306.mp3

On February 7, the U.S. Senate Committee on Banking, Housing, and Urban Affairs heard testimony from a variety of consumer advocates and mortgage industry spokespeople on the problems of predatory mortgage lending practices and their role in the mounting mortgage foreclosure claims across the country.  Although mortgage industry professionals suggested that the climbing foreclosure rate is the result of numerous possible and probably combined factors, the foreclosure rate for ARMs and other non-traditional subprime mortgages is substantially higher than that affecting traditional mortgages.

In addition, the Center for Responsible Lending recently conducted a study indicating that minority applicants are disproportionately steered toward high-cost subprime loans, even when their credit scores would have allowed them to qualify for more favorable loans or rates.

Children First for Oregon released its County Data Book 2006 on Tuesday.  The report mostly focuses on child welfare and health but it does also highlight an interesting fact regarding personal bankruptcy filings in Deshutes County, Oregon. 

The county's personal bankruptcy petitions increased by two-thirds between 2000-2005.  Nine out of every 1,000 people living in the county filed for personal bankruptcy in 2005.  The report also indicates overall Oregon personal bankruptcy filings increased 77% in the same five years.

Recent studies of bankruptcy petitioners have shown that medical expenses and associated lost income were a major factor in their financial problems, and consumer credit information from the federal government has confirmed that medical expenses are a primary reason for consumer borrowing, so it should come as no surprise that those without medical insurance and those who have faced major medical expenses over the past few years tend to have higher credit card debt.

A study just released by Demos reveals some interesting numbers:

• Low and middle income households with a major medical expense in the past three years carry an average of 45.9% more credit card debt than similarly situtated households without a recent major medical expense.
• The average credit card debt for families without medical insurance is 32.2% higher than that of families with medical insurance.

Georgia bankruptcy petitions outnumbered every other state during the period January through October 2006.  While bankruptcy filings declined in most other states after the bankruptcy law reform in 2005, the number of Georgia bankruptcy petitions declined very little.

Chapter 13 bankruptcy petitions are more common than Chapter 7 bankruptcy petitions in Georgia.  Since the reform mostly impacted Chapter 7 bankruptcy requirements, it did not impact Georgia bankruptcy petitioners as much as in other states. 

Georgia is also one of only three states in which home foreclosures move extremely fast.  Filing a Georgia bankruptcy petition is a fast way for a homeowner to temporarily stop the bank from selling their home in a foreclosure proceeding.

As of December 12, Idaho bankruptcy cases were down 75% in 2006.  Consumers filed 3,000 Idaho bankruptcy petitions during 2006 compared to 12,000 bankruptcy filings in both 2005 and 2004,   Analysts cite the 2005 bankruptcy law change as the cause of the decrease. 

Other bankruptcy analysts predict Chapter 7 bankruptcy petitions in Idaho will increase this year since few people earn the median income of $48,874 for a three person household and therefore, meet the median income test required to file a Chapter 7 bankruptcy.

The Mortgage Bankers Association said Idaho delinquencies rose sharply in the 3rd quarter of 2006.  Mortgage analysts expect more Idaho homeowners will default on their adjustable rate mortgage loans in 2007 as interest rates rise.  Many of these same homeowners will likely file a Chapter 13 bankruptcy to save their home.

Forbes writer Hannah Clark predicts a bankruptcy boom is coming.  She says a lack of due diligence by lenders is creating an environment where companies can easily borrow cash without proving they will be able to survive in the long run.  Some of these companies are simply using the borrowed cash to pay vendors and creditors in the short term without considering changes they should make to survive in a variable economy.

Financial experts say that some of the businesses that are taking on additional leverage will not necessarily be better off and will be surprised if and when they go to file bankruptcy.  The 2005 bankruptcy law change not only changed individual bankruptcy filing requirements but also changed business bankruptcy filing requirements.  Companies are now required to pay vendors and utilities, and they are required to pay outstanding taxes in five years as opposed to the previously required six years.

Less than 28,000 businesses filed for bankruptcy in the year ending September 30, 2006 compared to over 34,000 in 2005 and 39,000 in 2002 during the "dot.com bust".  Restructuring experts expect a correction of corporate bankruptcy rates in 2007. 

The fact that illness and injury present a significant economic risk to the middle class shouldn't come as a surprise to anyone; Ted Kennedy talked about it in his 1972 book, and medical expenses have multiplied dramatically since that time.

Studies of bankruptcy petitioners conducted in the late 1990s and early 2000s revealed that approximately half of all bankruptcy petitioners had been seriously impacted by illness / injury and medical expenses.  That alone might come as a surprise to the credit industry mouthpieces who would have us believe (and who managed to convince Congress) that bankruptcy petitioners are a bunch of deadbeats with high credit card bills and no sense of financial responsibility, but here's an even bigger surprise:  the vast majority of those bankruptcy petitioners knocked down by medical bills had medical insurance.

A number of hospitals and medical centers are filing bankruptcy this year.  Some of the organizations will reorganize and layoff staff while others will simply shut their doors once their bankruptcy attorney files the bankruptcy petition.  Medicaid funding issues are often cited as one of the problems forcing the hospitals and medical centers to file bankruptcy.

• Kahuku Hospital in Hawaii will file for Chapter 7 bankruptcy and layoff up to 70 staff members at the end of December.
• Victory Memorial Hospital in Bay Ridge, New York filed for a Chapter 11 bankruptcy in November.  The 1000 employees will continue to work while the hospital reorganizes.
• The Schuster Group filed an Oklahoma bankruptcy petition recently but will continue to operate 6 hospitals in the state.  The company decided to file the Chapter 11 bankruptcy petition after it was unable to pay 380 staff members of the Moore Medical Center due to financial problems.
  

Critics and supporters agree Ford Motor Company's plan to put up nearly everything it owns for collateral, in order to acquire financing, is a very bold move.  Ford has never before had to pledge any assets to acquire financing in its 103 year history.  But now Ford must to put up all of its major assets to raise enough cash and credit to pay for a restructuring plan that includes a mass layoff of 40,000 jobs and closing of at least 12 plants.  

As auto sales show signs of declining in 2006, many of Ford's suppliers have already declared bankruptcy or initiated mass layoffs to reduce expenses when the demand for parts decreased.  Ford executives disagree with experts who say we will see major decreases in automobile demand through 2007.  They are willing to bet Ford's plants, office buildings, patents, trademarks as well as stakes in Volvo and Ford credit that demand will not decrease and the restructuring plan will enable the auto manufacturer to stay out of bankruptcy.

California companies announced 346 mass layoffs in October 2006, up dramatically from 246 in September.   The Bureau of Labor Statistics reported unemployment insurance claims made by California workers increased by more than 13,000 in October 2006 compared to September.

Mass layoffs can occur when businesses decide to restructure by shutting down plants or closing stores due to decreased product demand or increased operating expenses.   In some cases, a mass layoff is the only way a company can successfully emerge from bankruptcy.  Unfortunately, laid off workers may find themselves with increased financial burdens if they are unable to find a new job.  Many people decide to file for bankruptcy shortly after they lose their job.

The American Bankruptcy Institute and Dow Jones Daily Bankruptcy Review recently conducted a survey of 90 restructuring professionals of whom 71% agree the number of corporate restructurings will spike in the near future.  The respondents disagree on whether the restructurings will begin 6 months from now, 18 months from now or sometime in between.  Corporate restructurings may result in mass layoffs which can lead to increased personal bankruptcy filings when the employees laid off are unable to find other jobs.

Challenger, Gray and Christmas, Inc., recently released a study that shows IT job cuts increased by 74% in the last quarter. The computer sector accounted for 30,511 of the 50,957 layoffs. The staff reductions occurred as many technology companies implemented restructuring and cost cutting plans.

We're looking for an individual or family with a horror story to tell about your adjustable rate, interest-only, or other exotic mortgage and the problems it caused. These mortgages are forcing families across the country into foreclosure because they didn't understand what they were getting into; telling your story may help others avoid that trap. If you have a story you'd be willing to share, please contact us TODAY.

As businesses across the country file for bankruptcy protection, their economic problems trickle down to their employees, the local economy, and in some cases even the national economy. Business bankruptcies may mean mass layoffs, pay cuts, or reduced hours. In addition, the company in bankruptcy is likely to reduce or eliminate services and materials previously purchased from outside companies, creating a chain reaction that may force those other companies to reduce staff.

One year after the bankruptcy law change that was supposed to clean up the "bankruptcy problem" in America, former U.S. Senator John Edwards is weighing in with some tough thoughts on the real root of the problem. In a nutshell, Edwards says it's time to crack down on predatory lenders.

Credit industry "experts" and consumer bankruptcy attorneys have debated the impact of the October 17, 2005 bankruptcy law change for well over a year now, and are no closer to agreement. But a simple statement from the Administrative Office of the U.S. Courts seems to put the matter in perspective: "As more months go by, filings may increase again because consumers will continue to experience the kinds of financial difficulties that lead them to file for bankruptcy - overspending, loss of employment, loss of health insurance, major illness, and divorce."

That about sums it up; none of the economic factors that forced people into bankruptcy have gone away, and no new solutions are offered by the changes in the law. In fact, the very credit counseling agencies Congress mandated bankruptcy petitioners to work with are determining that most prospective bankruptcy filers have no other realistic options. With all of the same financial problems and no new solutions offered, it seems inevitable that consumers will have no option but to continue to turn to bankruptcy protection.

Lawyers handling Idaho bankruptcy cases filed 778 bankruptcy petitions in the second quarter ended June 30, 2006. This increase meant 261 more consumers used bankruptcy as a means for dealing with their financial situation compared to the first quarter of this year.

Even though Idaho bankruptcy cases are down overall from 2005, each quarter in 2006 continues to show an increase in filings. Idaho bankruptcy courts will probably process a higher number of cases in the third and fourth quarters of this year as well.

Jacksonville foreclosure actions occur at the highest rates in neighborhoods with the highest murder rates, according to Jacksonville Area Legal Aid (JALA). JALA broke down Jacksonville foreclosures and murders by zip code, and revealed that the Jacksonville neighborhoods within the 32206, 32208 and 32209 zip codes had the highest rates of foreclosure actions in Jacksonville, and also the highest murder rates.

The correlation is likely due to the high incidence of subprime mortgages in depressed neighborhoods. JALA is working with the Jacksonville Sheriff's Department, the Jacksonville City Council and the Mayor's office to help find ways to lower the Jacksonville foreclosure rate and the murder rate.

As of October 1, Washington D.C. bankruptcy petitioners will face greater obstacles to filing under Chapter 7. That's because Chapter 7 filers must qualify under the Chapter 7 "means test", a test which employs median income figures for the petitioner's state and family size.

Median incomes have declined in many states, some in multiple family-size categories. However, Washington D.C. bankruptcy petitioners face the greatest change. On and after October 1, a single Washington D.C. bankruptcy filer will be subjected to means testing using a median income $4,000 lower than the one currently applied. Washington D.C. bankruptcy petitioners with larger families will face even higher hurdles: the median income for a 2 person household has declined by more than $10,000.

The Federal Reserve Board recently announced the conclusion that credit industry practices played little or no role in the "bankruptcy problem" in the United States. The Board might have done well to consider some recent statistics about the credit industry and the consumers indentured to it:

- In 2005, the credit card industry took in $11 billion in late fees alone

- Average household credit card debt increased 167% between 1990 and 2004

- The average interest rate paid on credit cards during 2005 was more than 14%

- The average debt for Americans age 65 and older increased by 89% between 1994 and 2004

Many consumers hoping to avoid bankruptcy turn to debt settlement companies, but the Federal Trade Commission has recently warned that many debt settlement companies employ dishonest practices that cost consumers thousands of dollars without solving their problems.

Many Texas debt settlement customers have been taken advantage of this way, but the Texas Attorney General has stepped in to help them find relief. Consumers who used the services of Dallas debt settlement company "DebtXS" are receiving refunds after the company reached a settlement with the Texas attorney general this week.

The Attorney General stated that the Texas debt settlement company's fees were confusing and misleading. In addition to agreeing to the refunds, the Dallas debt settlement company has agreed to halt its deceptive advertising practices.

The Center for Economic Progress released an "economic snapshot" of the country this month, and that picture makes it clear that the economic factors responsible for the increase in bankruptcy filings over the past few years have not improved. Some observations from the report:

--Factoring in inflation, hourly wages have increased only 1% since March, 2001.

--In the first quarter of 2006, families spent an average of 13.9% of their disposable income to service debts

--The poverty rate in 2004 (the last year for which there is reliable available data) was 12.7%--up from 11.3% four years earlier.

--The price of gasoline has more than doubled in the past five years

--The percentage of private sector workers with pensions has declined, as has the percentage of people with employer-provided health insurance benefits.

With these factors at work in the economy, it should come as no surprise to Congress that bankruptcy filings are rapidly working their way back to pre-reform numbers.

University of Illinois law professor Robert Lawless recently published an extensive report predicting that we will see the impact of Hurricane Katrina reflected in bankruptcy filing statistics for up to three years. The study analyzed all 18 hurricanes and tropical storms that have caused $1 billion or more in damages since 1980, and found a clear trend toward increased bankruptcy filings in the affected areas for up to thirty-six months. Read the full article here: Hurricane Victims Likely to Impact National Bankruptcy Filing Rates

Liz Pulliam Weston's column on MSN Money goes beyond the fluctuation in the number of bankruptcy filings--both the initial drop-off after October 17 and the quiet but steady climb since--to the root causes and comes up with the same old story.

The column points out that the key factors that triggered the high volume bankruptcy filings over the past decade are still in place:

1. Credit expansion, including the extension of credit to consumers with questionable ability to repay. According to Weston, the amount of outstanding credit card debt has more than quadrupled since 1990;

2. Financial illiteracy in America. According to a recent study prepared for the National Council on Economic Education, only 1/3 of adults had a good understanding of basic economic and personal finance concepts;

3. Interest rates without caps. Credit card "penalty rates" can be triggered by a single late payment, and often exceed 30%; and

4. Inadequate medical insurance coverage. This is particularly ominous in view of the large proportion of recent bankruptcy filers who cited uninsured medical bills as their primary trigger for filing. According to the U.S. Census bureau, there are currently approximately 45 million uninsured Americans-and they're not necessarily, or even primarily, lower income consumers.

With these factors continuing to play a significant role in the U.S. economy, it seems likely that consumers will be compelled to consider bankruptcy in increasing numbers despite Congress's efforts.