Crowds Race to File Bankruptcy Petitions By SANDY SHORE, AP Business Writer Fri Oct 14, 5:22 PM ET DENVER - Facing a weekend deadline, thousands of people armed with bulging files of paperwork lined up at courthouses around the nation Friday to seek bankruptcy protection from creditors before a new law makes it much more difficult to shed debt. ADVERTISEMENT The number of cases filed before the law takes effect Monday was expected to set not only a national record but individual records in a number of states. Some clerks said bankruptcy filing records were beaten every day this week. In Denver, the line at bankruptcy court formed before dawn and quickly grew to more than 300 people as it stretched outside. Some pushed babies in strollers, while others sipped coffee and sodas. Nursing assistant Colleen Christian brought her 14-year-old son to help her punch figures into a court computer after spending long days on Chapter 7 paperwork at her home in tiny Cotopaxi, 100 miles south of Denver. With credit card debt hovering around $25,000, she said she had no choice but to file before the law changed. "It was a very hard decision because I've incurred these debts and I need to pay them," she said. "But it was such a weight." In Chicago, people crowded the hallway outside a packed waiting room for their initial meeting with a bankruptcy trustee. Substitute teacher Barbara Moore said she had been mulling a Chapter 7 filing for a few years when she heard about the pending law change. She was fearful medical expenses from a cancer diagnosis could add to her mounting credit card debt. "That's when I decided to stop dillydallying," said Moore, 51. "It just sounds like it's going to be much more difficult and expensive later." The law, the most sweeping reform of the U.S. Bankruptcy Code in decades, sets new limits on personal bankruptcy filing and requires people to get professional credit counseling before they are allowed to file petitions. It will prohibit most filers with above-average income from filing Chapter 7 petitions that allow debts to be erased. Instead, people deemed to have at least $100 a month left over after paying certain debts and expenses will have to submit a five-year repayment plan under more restrictive Chapter 13 guidelines. The law also sets some restrictions on businesses. Supporters believe the changes will help rein in consumers who pile up credit card debt only to wipe it out with a Chapter 7 filing. Opponents say the law will hurt those who incur debt unexpectedly such as with health problems or lost jobs. Since President Bush signed the law in April, the number of personal bankruptcy petitions has soared. Preliminary estimates expect a record 200,000 petitions to be filed this week alone, according to Burlingame, Calif.-based Lundquist Consulting, which compiles bankruptcy statistics. The firm said the current record of 102,863 was set last week. Clerk Yvonne Evans at the U.S. Bankruptcy Court in Atlanta said all 123 employees were called in to help deal with last-minute filers. "I can't even begin to tell you how extraordinary this is," she said. "The line is wrapped all the way around the 13th floor. It's wild." Filings were allowed in person through Friday, though attorneys making electronic court filings have until midnight Sunday. Christian, whose husband just found work nine months after losing his job, said bankruptcy will enable her to pay what she can. "I think everybody should be able to wipe the slate clean and start over," she said. Similar stories could be heard at courthouses across the country. Michael G. Bennett, 36, of Dedham, Mass., filed for Chapter 7 protection after six years of financial trouble left him with $35,000 in debt. "It hasn't happened overnight," said Bennett, who has a wife and 2-year-old son. "It will be much easier now to keep the creditors at bay." In Charlotte, N.C., the handful of people filling out bankruptcy petitions included Lorraine Martinson, 44, who was expecting to give birth to her first child Friday. "Both my husband and I owned our own businesses. I used to have real good credit so I was able to take out all kinds of credit cards," she said. "When we missed a payment, all of a sudden the interest rate was 30 percent." She said they tried to catch up but found themselves falling deeper in debt. "We spent a year crying over this," she said. "I'm not happy about it, but what choice do I have?" At the bankruptcy court for the Southern District of New York in Manhattan, people huddled under umbrellas against the rain as they waited for court to open. "Right now, my whole thing is to regroup," said Pamela Green, who said debt forced her to close her women's clothing boutique. In Plano, Texas, attorney Veronica Weaver was holding a stack of cases she planned to file. "We are seeing a little bit of everything, some of it's for medical reasons, some of it's a job loss and some are behind on mortgage payments," she said. Bankruptcy attorney Tom Feezey of suburban Chicago ran radio commercials in the recent weeks to notify prospective clients about the law change. Apparently it worked: Feezey said he made 15 Chapter 7 filings this week — triple what he would normally file in one month. "Now I know what it feels like to be an accountant on April 15th," Feezey said. ___ Associated Press Writers Mike Colias in Chicago, Mark Jewell in Boston, Paul Nowell in Charlotte, N.C., Steve Quinn in Dallas, Aleksandrs Rozens in New York and Harry R. Weber in Atlanta contributed to this report.
This is great news. One of Bush II, few lasting achievements. Debtors should be forced to face the wrath of their actions till the day they die.
Are there any *official* stats showing what percentage of those file for bankruptcy are caused by mounting medical bills and what percentage are due to pure drunken sailor type of spending? It's morally incomprehensive to require people who are illness stricken to "get professional credit counseling before they are allowed to file petitions."
i don't know how you'd quantify it. but attorneys who work in bankruptcy, either creditor side or debtor side, don't understand why so many seem to think that bankruptcies are for dead-beats who don't want to pay their bills. on the contrary, i see people crying at creditors' meetings because they feel so ashamed that they simply can't meet their obligations. i don't do debtor's work, typically...but an elderly couple at my church needed to file, and so i did it for them as a favor. it's completely a health thing with them. medical expenses are ridiculously high. i got their filing in on thursday...before the new law went into effect. soon i'll post a bunch on this in D&D. i'm gonna go grab dinner with Refman...a friend from law school who posts here who works for a firm that does nothing but debtor-side bankruptcy work. he was telling me a bit about it last night on the phone. his firm typically files 25 or so chapter 7's in a 45 day period...they filed over 120 leading up to this change. the new laws are a crock....and that's coming from a guy who has a large percentage of his work coming in from banks. but this is much more of a D&D topic than a hangout topic.
I can not believe the number of preapproved credit card forms we get everyday, typically we get 15 to 20 a week. Shouldn't credit card company take most of the blames?
Thanks so much for the perspective, Max. It's great to see you speak out. Although this new bankruptcy law doesn't affect me and my family one bit, I am deeply troubled by the rationale behind it, and very concerned about the fallout from it.
This law will force about 10% of those who wish to file chapter 7s into filing chapter 13s ~ those who file now will have to take credit counseling and financial management classes. There is more work for the lawyers to do before filing so their fee will go up ~ the bottom line is if you need to file a chapter 7 and wipe out your debt you will still be able to.
There are a lot of Drudge Report readers here, nearly every article posted there ends up on these pages.
i don't know where you're getting the 10% number. that's not what i'm understanding it to be, at all.
you should be. meanwhile, the feds have asked credit card companies to up their required minimum payment to 4% from 2%. guess what that means??? now you can't make your payment and BK is harder to come by. the banks keep winning, though. yea, banks...rah rah rah. this is the kind of crap that has me looking to vote D next time around.
It's going to be a lot more than 10% and it's going to be a lot more difficult than getting some counseling. Those who wish to file Chapter 7 will need to fall below the median income for the state (about $25k in Texas I think) in which they file from what I understand. Everyone above the medium income will have to pay up to $5,000 over 5 years to clear bankruptcy. On the lawyer's side it's also a lot more complicated because they'll now be liable for clients who don't declare everything. Lawyers will probably have to hire private investigators just to protect themselves. It's a real mess.
Yeah... they should, what with them puttin' guns to our heads to accept ALL their offers, and stuff... jk. Iknowhatchamean.
I have really tried to stay out of this since I am a debtor's attorney, but I simply have to post a few thoughts and replies. Are you for real? How many people do you personally know that have filed for BK protection? I personally have represented quite a few. I can tell you in all sincerity that 85% or so of the people who come through my office have fallen into a bad situation not of their own making. Facing the wrath of their actions? Yes...now some will face the wrath of contracting brain cancer or watching their breadwinning spouse die, or having children that needed help and they fell behind on payments. The entire world is in color, not in black and white. A Harvard study indicates that roughly half of all conumber BK cases are in large part due to out of control medical costs. Yes, and these "credit counselors" have in the past been owned by credit card companies. These are the same ones who have tried to entice my clients into paying their Discover card rather than their mortgage. That's what they need when struggling...a foreclosure. People need to accept ownership of their reckless fiscal behavior. But one of the goals of the Bankruptcy Code has always been to allow debtors a fresh start. Now that the new Code is going into effect, expect the pre-approved offers to double or triple. They simply know they have got you over the proverbial barrell. This is largely not true. It will force a goodly number of people into a 13. If you are below the median income but other factors seem to indicate (based on IRS standards) that you can pay in a 13...you end up in a 13. Plus, harsh new strictures are in place in Ch 13 making success much less likely. Nobody really knows what the "reasonable investigation" contemplated in section 707 will have to be. I think it will be tougher than rule 9011, but not to the point of needing a PI. There is a complex formula utilizing average income over the last 6 months less IRS standards (ie fake numbers...ie still calculating gas at $1.50 a gallon) to determine what the plan payment will need to be in a 13. People...13s are largely used to allow people to catch up on mortgage arrears so they can keep their house. Due to the new law, people will lose their homes when they could have caught up in a traditional Ch 13. Needless. What can I say? The creditors have paid loads of cash to the Republicans over the last 8 years to get this...now they have it.
This is the side of capitalism that I absolutely despise. I guess you gotta take the good with the bad. But playing with people's very lives because of money is absolutely shameful and 'backward' in every sense of the word. I think I am starting to understand as to why socialist policies are resonating more and more with the 'average' American. There just seems to be an ever-growing demand from the average American for the government to spend more and more money on social welfare. A friend of someone I know went through an ordeal because her daughter (a college student) was supposedly covered under her insurance as long as she maintained a full-time courseload. However, the daughter got very sick (kidney cancer) and eventually died, but the grief the mother went through was made much worse because the insurance company apparently wanted to withdraw the daughter's coverage because she wasn't a full-time student anymore, and instead stick the mother with the bill. She was freaking sick on her deathbed, how was she expected to continue her education?!! Anyways, it's absolutely sickening, and I think if such policies continue the people will 'revolt' in one way or another against politicians of BOTH parties that are only concerned about corporate welfare. If working-class/middle-class Americans continue to suffer, the backlash will be felt.
