For the third consecutive year, a record number of consumers have filed for bankruptcy protection during 1998. According to the Administrative Office of the U.S. Courts, nearly 1.4 million non business bankruptcies were filed in 1998. When compared to only 44,367 business bankruptcies, it works out to 31.5 consumer filings for every business filing. As usual the Central District of California was the busiest bankruptcy court in the country with 116,194 new filing during 1998. The number of new chapter 7 filings alone increased last year and for the first time set a record of more than 1 million new filings.
Bankruptcy filings are up because the stigma is down.
Means testing is based upon the belief that a record number of people are filing every year for bankruptcy protection because more and more people who could repay their debts are discharging them instead. The pundits say that this trend is driven by a combination of an increase in the net economic benefits that debtors derive from filing and a decrease in the personal shame and stigma that once was associated with filing. Indeed it is probable that continuing shame and stigma restrained bankruptcy filings for many years despite the purely economic benefits of filing bankruptcy. As more individuals file bankruptcy, bankruptcy will tend to become more socially acceptable, thereby reducing the stigma attached to it. Increased advertising of bankruptcy services and the prevalence of celebrities filing bankruptcy also reduce the stigma of filing.