WASHINGTON (Reuters) - A new law to deter consumers from seeking bankruptcy protection made filings plunge to a 20-year low in the first-quarter of 2006, but a rapid rise in new cases since then raises questions about whether the law is working as expected.
The 2005 bankruptcy reform law was pushed through Congress by banks and credit card companies that sought to prevent abuse by individuals trying to wipe their financial slates clean from runaway debt.
By making it more difficult to file for personal bankruptcy, the companies reasoned that consumers would be more likely to negotiate a repayment plan.
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"We are starting to see more bankruptcies being filed. They're taking longer, they're more complicated," said Maureen Thompson, legislative director of the National Association of Consumer Bankruptcy Attorneys. "These numbers will continue to creep up as people face a number of economic factors."
Those factors include traditional ones, such as poor money management, loss of a job, medical expenses and divorce. But some consumers are also falling behind on monthly mortgage payments as U.S. interest rates continue to rise.
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