U.S. bankruptcies rose nearly 40% in 2007. I bet you thought I overlooked that story. Not at all. It was such an easy story to write that I just procrastinated doing it.

Banks, lenders and credit card companies have received a huge benefit for all the money they paid to get bankruptcy reform legislation passed in the U.S. The amount of money they have saved since it’s passage far exceeds the amount they paid for lobbying and special favors to get the law passed to begin with.

The tragedy about American bankruptcy reform was that the new law did nothing to providing consumers with more or better options, just more pain and a benefit to lenders.

After an eight-year campaign by banks, retailers and credit card companies, Congress in 2005 passed the biggest changes in U.S. bankruptcy laws in a quarter-century, mandating an income test to measure a debtor's ability to repay obligations.

I now see my old friend Sam Gerdano is back in the news again.

Sam is the Executive Director of the American Bankruptcy Institute who is best known by me as the bravest man to move into a new home in the mud. And as usual Sam has his finger on the pulse of American bankruptcies.

Anyway, Sam is quoted as saying "The roughly 40% spike in consumer bankruptcies during 2007 presages even higher filings this year, as the heavy consumer debt load is made worse by the home mortgage crisis," Just like Sam to use a word I had to go look up, pressage.

Consumer bankruptcy filings rose 40% in 2007 as housing-market turmoil and increasing consumer debt levels led more people to seek protection from creditors.

The American Bankruptcy Institute, using National Bankruptcy Research Center data, said total consumer filings rose to 801,840 in 2007 from 573,203 in 2006.

With significant sub-prime mortgage loans scheduled to adjust through 2011 I can’t see any slow down to the financial pressure American families are and will face in the year(s) ahead.

According to an article from the International Herald Tribue,

“Now the pendulum on bankruptcy law could swing the other way.

As defaults and foreclosures grow, Congressional Democrats have been pushing for an expansion of bankruptcy judges' authority to reduce the size of home loans. Under existing law, bankruptcy judges can't modify loan terms on a bankrupt borrower's primary residence, but are permitted to do so for mortgages on second homes.

Democrats say legislation allowing judges to do so could help more than 500,000 homeowners avoid foreclosure, while Republicans and the mortgage industry say expanding this power would make lenders far more reluctant to extend home loans.”

How about this approach Republicans. Why don’t mortgage lenders become far more reluctant to extend loans in the first place that don’t make any sense? Has anyone considered that there would be no credit crisis if the lenders had not been in such a hell-fire rush to lend as far down the food chain as they could?