What do you get when you take a nation full of overspenders and debt-laden citizens and introduce a new policy whereby it becomes more difficult to escape from debt obligations?
A record number of bankruptcies.
This riddle is no laughing matter — it’s the current reality in America today.
If you’ve read PROFIT CONFIDENTIAL before, you’re well aware of the state of economic affairs in the United States today. Record debt levels in both government and the general population, a spend, spend, spend mentality that just won’t quit, a devalued dollar, a decline in manufacturing, massive layoffs, increasing interest rates putting pressure on the indebted… these are frightening times.
It’s not helping that President George W. Bush passed legislation earlier this year for a complete rewrite of bankruptcy codes. To simplify the changes, it’s just going to be a whole lot harder to claim bankruptcy, going forward.
The reality of higher interest rates — and therefore higher monthly payments — is starting to affect Americans right where it hurts… in the wallet. Many are finding that the things they could afford six months to a year ago are now out of their reach, and their budget. As a result, bankruptcy seems to be the only option for many U.S. citizens, and now they’re scrambling to file before the changes in law come into effect.
In the second quarter of this year (from April to June 2005), a record 467,333 bankruptcies were filed to the federal courts. Out of these, over 98% were personal bankruptcies.
“We are seeing the effect of consumers rushing to file now in order to avoid the impact of the new law,” American Bankruptcy Institute Executive Director Samuel Gerdano said.
The new law will be implemented on October 17, 2005, so cash- strapped Americans are getting down to the wire to file.
After that time, the quality of life and financial future for hundreds of thousands of debtladen Americans can only grow dimmer. While many struggling people could have been “saved” by filing bankruptcy as they suffer under the weight of a heavy debtload and rising interest rates on their shoulders, I have to wonder what will happen two, maybe three years from now, when so many Americans are being chased by creditors with no chance of reprieve.
I’m not surprised at all that the number of bankruptcies has reached its peak — but I worry what will happen when a population’s last chance for solvency is all but taken away by the same government that created this mess in the first place.