ATTORNEYS’ REPORT FINDS NEW BANKRUPTCY LAW INEFFECTIVE

February 23, 2006

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Ninety-seven percent of consumers seeking to file for bankruptcy so far this year cannot afford to pay back their debts, according to a survey by the National Association of Consumer Bankruptcy Attorneys (NACBA), MSN.com reported yesterday. NACBA surveyed six credit counseling agencies that have been working with more than 61,000 potential bankruptcy filers and assessing their ability to pay what they owe under a debt-management plan. That the NACBA survey found that only 3 percent of potential filers have the means to pay back some of their debts didn’t surprise ABI Executive Director Sam Gerdano. In 1998, when bankruptcy reform legislation was first proposed, ABI conducted a study of how many filers could afford to pay something back and found that only between 3 and 3.5 percent could. The NACBA survey also found that 79 percent of potential filers said their financial troubles were the result of circumstances beyond their control – e.g., a medical crisis or job loss.Bankruptcy filings year-to-date are down 74 percent from the same period last year, according to data from Lundquist Consulting, Inc. Brad Botes, NACBA’s executive director, said the filings may be down because some consumers falsely believe bankruptcy is not an option for them because of the more stringent law. Read more.