Bankruptcy Filings Soar Before Revamp

The number of bankruptcies in the United States surged to an all-time high in the second quarter as financially troubled consumers scrambled to file before a rewrite of bankruptcy laws took effect.

Bankruptcy filings to federal courts in the April-to-June quarter totaled 467,333, according to data released Wednesday from the Administrative Office of the U.S. Courts. That marked a record number of filings made in any quarter.

Of that total, 458,597 were personal bankruptcy filings; the remaining 8,736 were businesses filing for bankruptcy, the data showed.

“We are seeing the effect of consumers rushing to file now in order to avoid the impact of the new law,” said Samuel Gerdano, executive director of the American Bankruptcy Institute. He said the new law goes into effect Oct. 17.

This year, President Bush signed into law the most sweeping rewrite of the U.S. Bankruptcy Code in a quarter century. The law makes it tougher to erase debt obligations in bankruptcy.

Gerdano said he expected another jump in bankruptcy filings in the July-to-September quarter.

Bankruptcy filings had been fairly stable. For the 12 months ended June 30, bankruptcy filings totaled 1,637,254. That was a slight increase from 1,635,725 filings made during the corresponding 12-month period a year earlier.

Passage of the new law came after eight years of strenuous efforts by congressional backers, banks and credit card issuers.

Supporters say new provisions were needed to curb abuses of the bankruptcy system. Opponents claim that the changes will be especially hard on low-income working people, single mothers, minorities and the elderly, and would remove a safety net for those who have lost their jobs or face mounting medical bills.

The record bankruptcy filings in the second quarter surpassed the previous high of 440,257 filings in the second quarter of 2003, said Nathalie Martin, a resident scholar at the American Bankruptcy Institute.