Wednesday, October 05, 2005

13,000 Bankruptcy Filings Per Day Last Week

The Washington Post has this bombshell report on defaults. "Two weeks before a new, more restrictive national bankruptcy law goes into effect, financially strapped Americans are rushing to file for protection from their creditors, with filings climbing to an unprecedented average of 13,000 a day last week."

"Week after week records are toppled. Last week's 68,287 filings surpassed the record set the week before by 24 percent, and this week's total is likely to be higher. Daily filings averaged 10,367 in September, compared with an average of 6,079 in September 2004."

"Richard and Alice Lee of LaPlace, La., whose three-year-old house was damaged by Katrina, were among those who suddenly found themselves contemplating bankruptcy. They probably could have afforded repairs on Richard Lee's salary, which had been about $100,000 a year. But the storm took its toll on the Harley-Davidson dealership where he was manager, cutting his salary by half, he said."

"With five children, finances were tight before the hurricane, Lee said. 'We had never missed a payment and were always on time with our bills, but we couldn't afford for anything to go wrong.' Now, the Lees are getting ready to file for bankruptcy. 'We know it's going to have to happen, and we'd do a lot better now. We do it after the law changes, it would be harder.'"

"Louisiana lawyer Carolyn Patrick anticipate an even greater rush to file for bankruptcy from hurricane victims after the new law takes effect after mortgage companies start threatening foreclosure. Now, Patrick said, many mortgage firms have allowed homeowners to suspend monthly payments until January, but have said that all four monthly payments will be due then. When that happens, 'people who never thought about filing for bankruptcy will walk in the door,' Patrick said."

"That will only be the beginning, according to a recent study by a University of Nevada law professor, which found that bankruptcy filing rates in areas hit by hurricanes increased sharply two to three years after the hurricane."


At 8:20 PM, Blogger Chip said...

The volume of filings is unfortunate, certainly, but to the readers of your housing bubble blog it is no surprise at all. I'm sorry for the people who find themselves in this position. It is a shame that most of them could have prevented their current circumstance.

The very last thing I want, though, is for government, at any level, to step in and try to bail them out. Salvation, financially or spiritually, is a moral duty that should be left solely to churches, charities and neighbors.

In the end, only freedom from the State will set you free.

At 12:05 PM, Blogger Ben Jones said...

Good point Chip. When the Feds 'bailed-out' the S&L's it was really more of a controlled liquidation. That was a much smaller bust from what we face now.


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