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Bankruptcy Protection Required By More Americans

Published on 07/02/2010 -

Although the number of bankruptcies being filed may reach an all time high this year, there is significant concern that only a fraction of Americans who should seek bankruptcy are actually filing.

The number of filings in 2010 could reach 1.7 million, nearing the record high of 2 million that was set in 2005. But even these numbers are most likely not enough.

It became more expensive and restrictive for individuals to file for Chapter 7 bankruptcy after US bankruptcy laws were changed in 2005.

There is now serious concern that the number of Americans who need to file for Chapter 7 bankruptcy, which eliminates most debt, are not seeking it partly because of the 2005 laws.

The laws were changed because of the record number of filings and because credit card companies and banks wanted to decrease the number of chronic debtors seeking bankruptcy.

However, these laws may have severe economic effects, particularly when home foreclosures are still rising and when Sallie Mae projects that student loan defaults will continue to rise to nearly 40%.

Not only can bankruptcy greatly alleviate individual financial hardship, but it could also considerably contribute to the nation's economic rebound.

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