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Why the decline in nationwide bankruptcy filings?

Bankruptcy rates have been falling in Washington and other states during the past four years, but experts say they are not entirely sure what is causing the phenomenon. Personal bankruptcy is certainly in a lull, though the reason might not be what you think; gurus believe that tightened regulation, not more dedicated saving, may actually be preventing people from filing for financial protection. Nationwide bankruptcy filings have dropped by 14 percent since 2009, according to some estimates.

New regulations may have forced certain filers to choose different procedures than they would have otherwise. Bankruptcy filings dramatically increased in 2005, as many rushed to take advantage of older bankruptcy rules before new regulations were implemented. Those changes eliminated many filers from filing for Chapter 7 liquidation bankruptcy, instead forcing them into Chapter 13 bankruptcy, which is simply a restructuring of debts.

However, it appears that some Washington residents are simply waiting for the right time to file for bankruptcy. Scores of financial indicators show that Americans are still experiencing money woes. For example, 3 million people have been unemployed for six months or longer. Labor statistics also show that the number of working-age participants in the nationwide workforce has dropped to its lowest level since the 1970s.

Some experts believe that banks are playing a major role in the bankruptcy decline, while others hypothesize that families are simply becoming more responsible with their money. No matter the cause of the drop, it is important to note that there are still Americans who face overwhelming debt and serious financial challenges. Those who find themselves floundering in personal debt may still have options in bankruptcy court, depending on the nature of their accounts -- even though bankruptcy is decidedly less popular these days.

Source: Pittsburgh Post-Gazette, "Pittsburgh region seeing fewer personal bankruptcy filings" Tim Grant, Jul. 19, 2014

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