Article By: Srividya Srinivasan
The years from 2006 to 2008, were the worst of times with bankruptcy declarations and, apparently, it still is. The United States Courts confirmed that 1,306,315 bankruptcy filings during the year ending June 30, 2009, represented a 35 percent increase compared to the 967,831 cases filed during the same period last year”1. All chapters of bankruptcy saw this filing increase during this time period. Because of the recession, bankruptcy filings have steadily increased.
Sometimes bankruptcy is the only way out. People declare bankruptcy or enter into a consumer proposal, which is the term to pay creditors a fraction of their debt. Experts say the deep recession could ripple through bankruptcy numbers for several years.
There are many misconceptions about bankruptcies. People think everything is cleared out in a bankruptcy. People don’t get away with a clean slate. “Bankruptcy is meant to be rehabilitative, not punitive. ‘For many, this is a break they never thought possible,’ said Henry Vine, a trustee with Vine and Williams in Hamilton” 2. Some people think bankruptcy is an excuse for people that don’t want to pay; it is really about hardship. Steve Borsellino, also a trustee with Vine and Williams, says that most people learn their lesson the first time, but about 10 percent find themselves bankrupt again. "That's much higher than we'd like to see ... but most people appreciate the second chance. They see it as an opportunity to start over," Borsellino said.
Consumer debt is bearing most, but not all, of the blame for the largest climb in bankruptcy filings Western New York has seen in at least seven years3. Business filings peaked in 1987 and have declined by about 37 percent since that time. According to the American Bankruptcy Institute in Alexandria, Virginia, nearly 95 percent of bankruptcy cases filed last year were consumer cases.
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