U.S. bankruptcy courts: new provisions prompt 16% quarterly increase in bankruptcy filings

By Caroline Salls

Pittsburgh, Aug. 24 - The total number of bankruptcies filed in federal courts in the quarter ended June 30 rose 16% to 467,333 from 401,149 in anticipation of new bankruptcy provisions, according to a Wednesday report from the U.S. bankruptcy courts' administrative office.

The quarterly filings for 2005 are also up 11% from 421,110 filed in the third quarter of 2004.

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 became law on April 20, although many of its provisions will take effect on Oct. 17.

Bankruptcy filings remained stable in the 12-month period ending June 30, rising 0.1% to 1.637 million from 1.635 million for the year ending June 30, 2004, according to the report.

The report said the overall quarterly increase was primarily fueled by a surge in Chapter 7 filings, which rose 17.7% to 362,481 during the third quarter for the 2005 fiscal year from 308,028 during the third quarter of fiscal year 2004.

Of the total number of bankruptcy filings in the 12-month period ending June 30, there were 1.2 million Chapter 7 filings, a 2.5% increase over the 1.17 million Chapter 7 filings for the same period in 2004.

The next largest group of filings was Chapter 13 filings at 433,945, a 5.1% drop from the 457,171 filings in the 12-month period ending June 30, 2004. Chapter 12 filings totaled 290, a 4.0% drop from the 302 filings in the 12-month period ending June 30, 2004.

Chapter 11 filings also fell to 6,703 in the 12-month period ending June 30 from 11,048 in June 2004.

According to the report, Chapter 7 is designed to allow individuals to keep certain exempt property while the remaining property is sold to repay creditors. Chapter 12 is designed to meet the needs of financially distressed family farmers. Under Chapter 13 bankruptcy, creditors may be repaid in installments, in full or in part, over a three- to five-year period.

Chapter 15 of the Bankruptcy Code, created by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, deals with cross-border insolvency and governs the manner in which a foreign court may enlist the aid of a U.S. bankruptcy court.

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