Many Americans are now wondering if more people are filing bankruptcy today than back prior to the bankruptcy code changes of 2005. The fight has been ongoing of whether or not the economy is in the recovery stage or actually getting worse. Prior to 2005, the credit industry lobbied Congress to make drastic changes to the bankruptcy code because they believed many Americans were abusing the bankruptcy system. They thought that Americans were filing bankruptcy to wipe out their debts and do it all over again. There was some truth to it, but not everyone was filing bankruptcy for these reasons. After Congress amended the bankruptcy code many people raced in to file for bankruptcy and get their discharge prior to the changes taking effect. Worse, this caused record numbers of Americans filing for bankruptcy like never seen before. In 2006, the number dropped drastically and as Congress was patting themselves on the back, a new financial storm was brewing. 2007 came and along with it a financial meltdown that could only be compared to the Great Depression.
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Initially, things started off slow and many believed it wasn't as bad as they thought it would be. Companies began laying off people and continued to downsize through the economic downturn. The federal government kept the media busy saying that things were getting better, but in reality, the unemployment and foreclosure numbers started to increase at alarming rates. At the end of 2010, it was reported that there was 1.7 million Americans filing bankruptcy in that year alone. This got the attention of many economists who would have believed the high numbers recorded back in 2005 were a thing of the past. The good news is, even though unemployment has stayed above 8% for the last 3 1/2 years, the number of Americans filing bankruptcy is settled down to around 1.4 million per year. Will it continue to go down or is this the calm before the storm?
Looking at the economic statistics there are some frightening things happening that we as a nation have never seen. The jobs that are now being created are low-paying jobs and the careers of the past are disappearing. Companies are still streamlining and continuing to move manufacturing overseas to avoid paying high wages and exorbitant pensions for American workers. People who want to work or have had their unemployment insurance run out are now facing as their only option to work out at big-box discount stores. The pay is low and the benefits are minimal, but it beats living on the street.
Added to this phenomenon, the mortgage industry is gearing up for a second wave of people filing bankruptcy and foreclosures to hit from the left over ARM's from back in 2007. Many of these were negative amortization loans and are now set to come due, leaving the home owner in dire straits. This might be a one-two punch that corrects the real estate market even further. Living in these times can be very stressful that's why it's important for individuals to be proactive when it comes to financial matters. People should put away their pride and get help even if that means consulting a bankruptcy attorney to see if that is an option. This is not the time to bury their heads in the sand and think that an election will fix the problem. No matter who gets in office in November, the United States' financial problems are just beginning to heat up.
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