Friday, January 26, 2007

New Bankruptcy Law Not Changing Behavior

From Credit Slips (click on title for link):

More importantly, the bankruptcy filing rate has never been a particularly good measure of the number of families in financial distress. A better indicator of how many families are having difficulty managing their debts is the percentage of credit card debt that is charged off each quarter (the lavender line below). Here, too, BAPCPA has had an effect. The charge-off rate spiked in anticipation of October 17, 2005 as families that thought they might need bankruptcy filed (and thus charged off debt) in anticipation of the new law's effectiveness. The difference here is that the rebound has been much more pronounced. While chargeoffs are not yet back to the level of late 2005, they are getting close.

No comments: