Bankruptcy Article of the Week
Bankruptcy in 2008 - What Can We Expect?
Official numbers for calendar year 2007 aren't in yet, but we wrapped up FY 2007 in September with 755,344 non-business bankruptcy filings and continued to see month-to-month increases during the remaining months of the year. As we move into 2008, finally able to make year-to-year comparisons untainted by the surge and collapse in filings during the fall of 2005, bankruptcy filings are likely to continue to increase.
University of Illinois Law Professor Bob Lawless has forecast total bankruptcy filings of approximately 1.19 million in calendar year 2008, with a 95% confidence interval of .96 million to 1.43 million filings. But Lawless cautions that those numbers are based on the assumption that there won't be any dramatic changes impacting filing rates in the coming year. Some experts are predicting that we may see filings double during the coming year.
What about those "dramatic changes"?
- In the upcoming year, we can expect an additional $362 billion in subprime ARMs to reset.
- Proposed legislation will, if adopted, provide incentive for hundreds of thousands of homeowners facing foreclosure to pursue Chapter 13 bankruptcy plans.
- Subprime mortgage lenders continue to close their doors, file for bankruptcy protection, or close divisions, laying off thousands of workers.
- Other industries, including the home-furnishing and consumer electronics industries, are being hit hard by the slump in home sales and the tightening economy.
Whether we accept the more conservative projection that says the increase in filings will continue at a slower rate or the more dramatic prediction that filings will double and top 1.5 million in 2008, it seems clear that numbers will continue to climb, and that we can expect to break the 1 million mark in the coming year.
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Kevin's Corner
Practice Management Tip of the Week:
"Resolve to be positive.
"As a bankruptcy attorney, you already understand the importance of shining the right light on the decision to file for bankruptcy protection, but the dawning of the new year is the perfect time to clarify your vision of the role that bankruptcy can play in your clients' lives and how you present that vision to them.
"For many people, the new year means changes and resolutions—an effort to bring positive change to their lives. In short, exactly the kind of fresh start that bankruptcy promises.
"Clients visiting your office early in the year may be suffering from post-Christmas credit card overload. They may simply have been holding on desperately through the holidays and have finally admitted defeat. Or they may have a more positive outlook, and be calling your office as part of a plan to take control of their finances in the new year.
"Whatever their perspective when they walk through your office door, though, you'll want to be sure that they leave with this one: bankruptcy is a positive step toward regaining control of a financial life that's already gone awry. It's not giving up; it's taking action. It's not the end of the road; it's a new beginning.
"Like every new phase in life, post-bankruptcy will be what your clients make of it. So help them to make the most of it by instilling a positive attitude and reminding them that it's only the first step along the path to financial control."
- Kevin Chern
President, Start Fresh Today