Bankruptcy filings up as law takes effect

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. The quarterly total was the highest level of bankruptcy filings on record under a data series dating to the March 1995 period, the first quarter for which figures are available, a spokeswoman at the Administrative Office said. In the April-to-June quarter, just prior to and in the three months after a new federal bankruptcy act became law, filings totaled 467,333, up 66,000 from the previous period. Compared with a year ago, filings rose 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 residence. 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 Oct. 17.