Hundreds of consumers across country file bankruptcy petitions ahead of law change | VailDaily.com
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Hundreds of consumers across country file bankruptcy petitions ahead of law change

DENVER – Behind the armloads of paperwork and the long lines around the nation’s courthouses Friday was a simple wish for a fresh start.Chatting quietly, braving bad weather and simply waiting their turn, thousands of Americans lined up to file for bankruptcy protection against creditors before a new law makes it much more difficult to shed debt. The deadline is this weekend.”I think everybody should be able to wipe the slate clean and start over,” said Colleen Christian, a nursing assistant from rural Cotopaxi who waited with her 14-year-old son Aron at the Denver courthouse.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, including Colorado. Some clerks said bankruptcy filing records were broken every day this week.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, which 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 because of circumstances such as illness or unemployment.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.Filings were allowed in person through Friday, though attorneys making electronic court filings have until midnight Sunday.Christian, like countless other consumers who filed petitions, ran into difficulty with debt when an unforeseen circumstance cropped up – her husband was out of work for nine months.”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 Denver, the line at bankruptcy court formed before dawn and quickly grew to more than 300 people as it stretched outside and eventually turned a corner. By late afternoon, a judge and clerks went outside to work while other staffers continued working through the crowd inside.In Chicago, 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.”Joe Cavallaro, a 44-year-old hardware store salesman from Woburn, Mass., said he filed a Chapter 13 petition in hopes of keeping his home amid more than $300,000 in personal debt.Cavallaro said he took a home equity loan to temporarily keep his former wholesale florist business afloat, but ran into problems as he recovered from gastric bypass surgery.”If I hadn’t gotten sick, I never would have ended up here,” he said.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.”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.Lorraine Martinson, 44, of Charlotte, N.C., was expecting to give birth to her first child Friday and yet stopped by bankruptcy court to file.”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?”—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.—On the Net:U.S. Bankruptcy Court: http://www.uscourts.gov/bankruptcycourts.html


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