Bankruptcy also the rage in La Plata County
La Plata County residents are jumping into what a leader of Colorado’s bankruptcy court Wednesday called “a filing frenzy.”
Apparently prompted by a change in the federal law that goes into effect midnight Sunday, Coloradans are declaring personal bankruptcy at a record rate.
The looming change will make it harder to erase unsecured debt with Chapter 7 bankruptcy and force more people into Chapter 13 repayment plans. Some debtors will face a means test, paperwork will increase, and both filing and attorney fees will increase.
For more than 25 years, Brad Bolton has been clerk of court for the Denver-based U.S. Bankruptcy Court, where the state’s filings are made.
On Wednesday, he was reduced to superlatives: “filing frenzy,” “uncharted territory.”
On a normal day, between 100 and 125 Coloradans declare personal bankruptcy.
On Tuesday, 1,260 Coloradans filed – a tenfold increase over what would be considered a heavy normal day.
And at 4 p.m. Wednesday, 40 people were in line at the court on 19th Street in Denver; normally one or two people are waiting. Hold time on the phone was more than 14 minutes.
Bolton said most Denver attorneys – swamped with cases – stopped accepting new personal bankruptcy clients between two and four weeks ago, leaving many to try to navigate the complicated process “pro se.” He knew this because he attended a recent Colorado Bar Association event in which many attorneys told him they were too busy to accept new cases.
“There is what I would consider to be a filing frenzy,” Bolton said. “We’re in uncharted territory here.”
While September bankruptcy filings by residents in La Plata County and neighboring Montezuma County were virtually unchanged from the previous year, the first 11 days of this month were a different story.
Between Oct. 1 and Oct. 11, 2004, no one declared personal bankruptcy in La Plata County and just two people did so in Montezuma.
This year? Eight La Plata County bankruptcies, 10 in Montezuma. More recent figures were not available, but anecdotal evidence from a La Plata County resident who filed for bankruptcy this week suggests the numbers are continuing to climb.
And Henry Wright, a Durango bankruptcy attorney, said Wednesday he hadn’t seen his home in daylight in two weeks.
“I’ve never had so many phone calls in my whole life. A huge upsurge in cases,” Wright said. “Everybody’s frantic to go ahead and meet the bankruptcy deadline, which is midnight Sunday. That’s important for those of us doing electronic filing: 11:59 p.m. is a lot different than 12:01 a.m.”
Electronic filing – accessible to attorneys – created a headache for Bolton’s office over the Columbus Day weekend. On Oct. 7, Bolton closed shop with 676 personal bankruptcy fillings filed that day. Over the three-day weekend, attorneys filed 934 more cases electronically. On Tuesday, clerks came to work facing 1,610 cases – to which another 1,260 cases were added that day.
Bolton said it’s all part of a national phenomenon caused by increasing media publicity of changes in the federal law that passed April 20 and goes into effect Monday.
“This is happening in many districts around the country,” he said.
Wright predicted the beginning of a credit squeeze. He painted a scenario in which financial life is going to get considerably harder quickly.
In a move unrelated to the change in the bankruptcy law, credit-card companies are going to start requiring payments on principle – not just interest – in early 2006, Wright said.
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