August 24, 2005

U.S. bankruptcy filings rise as new law takes effect

WASHINGTON (Reuters) - Bankruptcy filings in U.S. federal
courts jumped 16 percent in the quarter ended June 30 from the
previous period as individuals rushed to file before a tougher
law takes effect, a report from the Administrative Office of
the U.S. Court showed on Wednesday.

In the April-to-June quarter, just prior to and in the
three months after a new federal bankruptcy act became law,
bankruptcy filings totaled 467,333, up 66,000 from the previous
period. Compared with a year ago, filings were up 11 percent,
the Administrative Office said.

Filings in the 12 months ended June 30 rose 0.1 percent to
1.64 million from the comparable period a year ago.

The Administrative Office of the U.S. Court said the
overall increase in filings was primarily fueled by a surge in
Chapter 7 filings, which calls for the liquidation of assets
but allows filers to keep some property, such as a primary

A new law passed earlier this year makes it tougher for
individuals to qualify for Chapter 7 bankruptcy, forcing them
instead to file under Chapter 13, which places debtors in
repayment plans. The act became law on April 20, although many
of its provisions will take effect on October 17.