Bankruptcy

The economic slowdown that started in United States and sent ripples across the globe is taking its toll on all the major macroeconomic indicators of the country. Reports suggest that the US Federal Reserve has reduced the GDP forecast for the FY 2009. It is being anticipated that United States economy would shrink by 1% or slightly more in the current fiscal year. It has affected employment and practically all sectors of the economy.

To cope up with the financial requirements of the prevailing market conditions, more and more individuals and business entities are filing bankruptcy.

Probable scenario in 2009
2009 has hardly seen the first 3 months, when financial experts are indicating that there are probable signs that 2009 will be a year when bankruptcy filings will register a record high. This will probably be the highest in the last 3 decades.

The incidence of corporate bankruptcies have increased manifold. And there are many companies in queue. As of February 20, 2009 33 cases of bankruptcy filings have been recorded. 33 cases include both Chapter 7 as well as Chapter 11. Bankruptcy filings during the same period in FY2008 was 14, the only difference is the companies filing for bankruptcy this year have comparatively more assets.

The pre-petition assets of these 33 companies when combined amounts to USD$65.7 billion. The figure has escalated by more than 7 times as compared to the same period last year. It has also been observed that majority of the companies that have declared themselves bankrupt, had sought protection in past (Chapter 22).

What’s new in bankruptcy?
With the introduction of the new bankruptcy law that took effect on 17th October 2005, filing for bankruptcy has become a tough job. Few changes have been made in the way consumers can file for bankruptcy. Given below is an overview of the same.

-Changes in the waiting period
If you have filed for bankruptcy, you could file for it again at frequent intervals. Under the new law, a considerable period of time should have elapsed before you can file for bankruptcy again.

-Eliminating all your debts
Previously, you could do away with all debts. As per the new law, there are only certain debts that can be eliminated.

-A bankruptcy lawyer for you
Earlier you could file for bankruptcy and take the decision on your own. The new law has made it mandatory that you need to consult a bankruptcy lawyer and if he deems it necessary for you to file for bankruptcy, you can go ahead.
Even though filing for bankruptcy will reduce your chances of getting new credit, it is sometimes the only option that a consumer is left with. Nevertheless, it has helped many recover financially.