Consumers Race to File Bankruptcy Petitions

[SteveR]

The new bankruptcy law is bringing the LATM folks out in droves to file before the law changes on Monday. Yikes!

AP

"...Across the nation, about 100,000 petitions were filed in the first three days this week, according to Burlingame, Calif.-based Lundquist Consulting, which compiles bankruptcy statistics. The firm said 102,863 were filed last week, a record expected to fall.

The new law, the most sweeping reform of the U.S. Bankruptcy Code in decades, takes effect Monday, setting new limits on personal bankruptcy filing and requiring people to get professional credit counseling before they may file petitions. It will prohibit most filers with above-average income from filing Chapter 7 petitions that allow debts to wiped out.

Instead, people deemed by a "means test" 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 the more restrictive Chapter 13.

At the U.S. Bankruptcy Court here, clerk Brad Bolton said the number of filings set a record every day this week, with nearly 2,000 filed on Thursday alone.

"We've never seen anything like this," he said, standing in a corridor near the courthouse door. "Every day has just gotten worse than the day before.""

 

[brewer12345]

I get the feeling we are getting half a year's woth of filings in the 6 or 8 weeks leading up to the change. Ain't gonna be pretty for anyone in trouble after Sunday.

 

[Martha]

I bugged out of town and out of the practive before the rush. Haven't filed bankruptcy for anyone in about a year. Most bankruptcy lawyers I know quit taking cases a while ago to get them all done before the law changed. Lot of the people coming in to file in the last few days are doing it without an attorney. The clerks are having a great time trying to process it all.

 

[JPatrick]

Does this new law have any impact on business/corporation filings??

 

[brewer12345]

Does this new law have any impact on business/corporation filings??

Yes. Many, many things change to make it a lot less advantageous to file. That is why so many corporations filed recently. Martha, would you like to give us a summary of the changes to corporate BK?

 

[Martha]

Yeah, but not right now. I am sitting here on the road on a nice wi-fi connection and not in the right state of mind to think too much about bankruptcy. Most of the changes to Chapter 11 rules involve trying to shorten up the process. A number of the changes will make it less likely for businesses to successfully reorganize. For example, a chapter 11 debtor will have a relatively short time to decide whether to accept or reject a lease. The shortened time period will make it very difficult for debtors, like Macy's or Kmart, to make a good decision as to whether a location is viable.

Most of the changes are boring stuff like this.

The true purpose of bankruptcy reform was to make it more difficult and expensive for individuals to file bankruptcy.