While Congress continues to struggle to reach consensus on comprehensive bankruptcy reform, filings for protection from creditors in the U.S. continue to rise to record levels. The reasons cited for the increase include a sagging national economy and the threat of tougher rules for debtors under any new bankruptcy reform measure.

The total number of bankruptcies and the total number of non-business (personal) bankruptcy cases filed in the 12-month period ending June 30, 2003, once again broke records, according to data released today by the Administrative Office of the U.S. Courts and compiled by the American Bankruptcy Institute. In that one-year span, filings increased 9.6 percent from 1,505,306 bankruptcy cases to 1,650,279--the largest number of cases ever filed in any 12-month period.

Moreover, non-business (personal) bankruptcy filings also reached an all-time high for any 12-month period. Non-business filings were up 10 percent, totaling 1,613,097 for the 12-month period ending June 30, 2003, compared to 1,466,105 cases filed a year earlier.

However, over the same period, business filings actually fell by 5.2 percent to 37,182 from 39,201 in 2002.

Filings during the second quarter of 2003 totaled 440,257, the most ever in a 3-month period, surpassing the 412,968 cases filed during the first quarter of this year.

Further statistical analysis reveals that Chapter 7 (liquidation) increased by 10.7 percent from 1,053,230 to 1,165,993, while Chapter 13 (repayment plan) filings saw a 7.4 percent increase to 472,811, over the 440,231 the previous year. Chapter 12 (for farmers) filings rose 111.2 percent, from 367 to 775 in the same 12-month period ending June 30, 2003. Only Chapter 11 (business reorganization) filings fell 7 percent, decreasing from 11,401 in 2002 to 10,602 in 2003.

Bankruptcy Reform Still in Limbo

In March of 2003, the House of Representatives passed a comprehensive reform measure that mirrors bankruptcy legislation from 2002, the Bankruptcy Abuse Prevention and Consumer Prevention Bill. But the House bill does not contain a controversial protestor provision, which lead to its defeat last year when a congressional conference committee could not agree on compromise language.

The measure, however, faces an uncertain future in the Senate, where Sen. Charles E. Schumer (D-N.Y.) is expected to offer the controversial provision, which prevents protestors from using bankruptcy laws to discharge any monetary court judgments levied on them as a result of their actions against a lawful commercial activity.

For more information on the current rules of bankruptcy and how they interact with a comprehensive asset protection plan for your small business, check out our book, Safe Harbors: An Asset Protection Guide for Small Business Owners, available at major book sellers. New, stricter rules for debtors will be part of any bankruptcy reform, and you may want to consider what it could mean to you and your business before it's too late.

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