A SURGE IN BANKRUPTCY FILINGS IS EXPECTED AHEAD OF NEW
LAW
by Gintautas Dumcius
Wall Street Journal (Eastern edition).
June 1, 2005. p. D2
Bankruptcy lawyers and others are bracing for an increase in
bankruptcy filings in advance of a new law that makes it harder for
individuals to erase their debts.
The law goes into effect Oct. 17, and already the numbers have
been creeping up -- climbing to 660,566 this year as of last week
from 635,443 in the comparable year-earlier period, according to
Lundquist Consulting Inc. While official U.S. Bankruptcy Court
numbers for the first quarter aren't yet available, some experts say
a big increase is inevitable, especially because the number of
bankruptcy filings fell 3.9% to 1.55 million last year, the first time
that has happened since 2000. Bankruptcy filings totaled 1.62
million in 2003.
The rise in filings is partly attributable to media coverage of the
new law, says Jeffrey Morris, professor at the University of
Dayton Law School and a scholar at the American Bankruptcy
Institute, a research group. "It's just spurred [people] on to act a
little more quickly."
The Bankruptcy Abuse Prevention and Consumer Protection Act,
enacted in April, is the biggest overhaul of U.S. bankruptcy laws
since 1978. The law limits consumers' use of Chapter 7 of the
U.S. Bankruptcy Code to wipe out credit-card bills or loans that
aren't secured by a house or other asset. It imposes on the
bankruptcy court a strict means test to make sure people with
assets repay some of their debts. It also requires debtors to submit
to credit counseling and imposes other paperwork obligations that
may dissuade some from seeking bankruptcy protection.
Over the past decade, whenever it looked like Congress was
close to passing a bankrupcty overhaul bill, filings kicked up, says
Stu Feldstein, president of SMR Research Corp., a
market-research firm in Hackettstown, N.J. "We should see new
spikes in June and continue to through very high levels in October,
at which point they should plummet," he says. In his firm's
sampling of courts throughout the country taken the last three days
of March, total filings were up 15.6%, and Chapter 7 filings were
up 24.2%, Mr. Feldstein says.
"We've seen a rise in Chapter 7" filings, says bankruptcy lawyer
Michael Budwick, a partner at Meland Russin Hellinger & Budwick
in Miami. Because the new law puts the onus on the lawyer to
certify a client's assets, liabilities and transactions, the firm plans to
be more selective in the pro bono Chapter 7 cases it handles, he
says. Fees are expected to rise after the law goes into effect
because it is more complicated.
More articles are available at the Wall Street Journal's website.
LAW
by Gintautas Dumcius
Wall Street Journal (Eastern edition).
June 1, 2005. p. D2
Bankruptcy lawyers and others are bracing for an increase in
bankruptcy filings in advance of a new law that makes it harder for
individuals to erase their debts.
The law goes into effect Oct. 17, and already the numbers have
been creeping up -- climbing to 660,566 this year as of last week
from 635,443 in the comparable year-earlier period, according to
Lundquist Consulting Inc. While official U.S. Bankruptcy Court
numbers for the first quarter aren't yet available, some experts say
a big increase is inevitable, especially because the number of
bankruptcy filings fell 3.9% to 1.55 million last year, the first time
that has happened since 2000. Bankruptcy filings totaled 1.62
million in 2003.
The rise in filings is partly attributable to media coverage of the
new law, says Jeffrey Morris, professor at the University of
Dayton Law School and a scholar at the American Bankruptcy
Institute, a research group. "It's just spurred [people] on to act a
little more quickly."
The Bankruptcy Abuse Prevention and Consumer Protection Act,
enacted in April, is the biggest overhaul of U.S. bankruptcy laws
since 1978. The law limits consumers' use of Chapter 7 of the
U.S. Bankruptcy Code to wipe out credit-card bills or loans that
aren't secured by a house or other asset. It imposes on the
bankruptcy court a strict means test to make sure people with
assets repay some of their debts. It also requires debtors to submit
to credit counseling and imposes other paperwork obligations that
may dissuade some from seeking bankruptcy protection.
Over the past decade, whenever it looked like Congress was
close to passing a bankrupcty overhaul bill, filings kicked up, says
Stu Feldstein, president of SMR Research Corp., a
market-research firm in Hackettstown, N.J. "We should see new
spikes in June and continue to through very high levels in October,
at which point they should plummet," he says. In his firm's
sampling of courts throughout the country taken the last three days
of March, total filings were up 15.6%, and Chapter 7 filings were
up 24.2%, Mr. Feldstein says.
"We've seen a rise in Chapter 7" filings, says bankruptcy lawyer
Michael Budwick, a partner at Meland Russin Hellinger & Budwick
in Miami. Because the new law puts the onus on the lawyer to
certify a client's assets, liabilities and transactions, the firm plans to
be more selective in the pro bono Chapter 7 cases it handles, he
says. Fees are expected to rise after the law goes into effect
because it is more complicated.
More articles are available at the Wall Street Journal's website.
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