There has been a number of factors that are thought to be responsible for the steady increase in the rate of bankruptcy filings in 2010. Back in 2008, bankruptcy filings were peaking at 3500 per day and was a call for concern to many individuals. Many thought that the new bankruptcy law would be a fix all because the numbers dropped of those filing bankruptcy recorded back in the months following the October 2005 bankruptcy code changes. And then the current economic crisis hit. Currently, in the summer of 2010 the US courts are averaging 6900 at day. At this rate there will be over 2 million bankruptcies filed in 2010. There are various factors which are responsible for the increase that is happening. One of these being, credit card companies were putting credit into the hands of individuals that were once vilified. Higher interest rates on credit cards is not helping and even those who have never had to file bankruptcy face higher risks with their debt to income ratios being so high.
In early 2010 Credit card interest rates rose drastically along with Bankruptcy filing. Many people didn’t even notice. And that doesn’t even include the reduction in rate that banks and creditors are paying to borrow the money. The Federal Reserve rate has dropped from 5.25% in September of 2007 to 0.25% or less currently. In the beginning of 2010 many credit card companies raised their rates to 26% or more increasing their profit margins substantially. Not everyone pays interest on their credit cards when they pay in full each month, but when a borrower is paying 26% to their credit card company, they are paying the creditor 100 times what it costs for the company to borrow the money. Rather than cutting rates, the credit card companies are simply pocketing the extra money and putting many individuals in financial turmoil. In the end this will force many more into Chapter 7 bankruptcy to eliminate their credit card debts.