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Debtors rush to beat new bankruptcy standards

- The Washington Times - Friday, October 14, 2005

Washington-area residents rushed to file for bankruptcy yesterday before a new federal law setting stricter standards takes effect Monday.

Chuck Miller, who oversees the Alexandria Bankruptcy Court's clerk's office, called the recent turnout "phenomenal."

"It's amazing to see three clerks handling six or seven customers at a time when we normally have just one clerk out there handling maybe a handful of walk-ins on a given day," said Mr. Miller, divisional manager for the Alexandria division court.

The new 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 can file.

It also establishes a "means test," which will allow courts to examine the finances of debtors to determine the most appropriate chapter of the bankruptcy code for their filing.

Only if their income for the previous six months falls under the state median would they be eligible to liquidate all their debts under Chapter 7.

The clerk's office in Alexandria is receiving about 90 percent of its bankruptcy applications over the Internet, with the rest of applicants coming in at the last minute yesterday to file at the courthouse.

The public could file their claims at the courthouse until 4 p.m. yesterday, but lawyers can file bankruptcy claims online until 11:59 p.m. tomorrow .

Mr. Miller said in the last few weeks he has assigned every employee he can to the "staggering" number of bankruptcy cases that are being filed. Those cases reached a high Thursday, topping 336 cases in one day. About 975 cases have been filed this month, more than twice the 483 cases the clerk's office received for the entire month of August.

"I normally have seven people handling these cases but now I have 14," Mr. Miller said at his office yesterday morning, adding that some have been staying late to process the cases. Employees in cubicles next door were busily reviewing hundreds of cases pouring in from lawyers, who generally have filed them online.

John Brooks of District Heights was one of about 15 people lined up outside the Maryland Bankruptcy Court in Greenbelt yesterday morning.

"I knew when the president signed the new law ... that it was going to be harder to take creditors off," he said. "We knew it was the best time [to file], we just waited until the last minute."

A Capital Heights woman who did not want her name used said she, too, rushed to get her paperwork to the court before the deadline.

"I was trying to decide if this was my last option. I don't think this is going be available to me after Monday," she said of her Chapter 7 filing, which eliminates filers' debts.

A Silver Spring man whose wife filed for Chapter 7 yesterday said she wanted the help of an attorney to do her bankruptcy filing but had to do it herself.

"The attorneys weren't taking anymore clients," he said.

About 100,000 petitions were filed nationwide in the first three days this week, according to Burlingame, Calif., company Lundquist Consulting, which compiles bankruptcy statistics. The firm said 102,863 were filed last week, a record expected to fall.

"My best advice is, don't stand near the courthouse," said Kate Williams, spokeswoman for Money Management International, a nonprofit financial-counseling service. "You're going to get run over with all those filers."

Karen Redmond, spokeswoman from the Administrative Office of the U.S. Courts, said the agency has heard reports of recent spikes in filings, but would not comment further.

The Alexandria court's computer system has been holding up during the deluge of filings in the past month, but Mr. Miller said he has workers on-call in case of problems this weekend.

The clerk's office expects last-minute bankruptcy cases to keep them swamped Monday and Tuesday.

Representatives for the clerk's offices at the U.S. Bankruptcy Court for the District of Columbia and Maryland did not return repeated calls for comment.

Bankruptcy attorneys have been busy completing the filings.

The Baltimore office of Grossbart, Portney & Rosenberg averages about 45 filings per month. In October, they probably will get about 150, said lawyer Robert Grossbart.

"It started increasing about a month ago and has gotten progressively worse," he said.

As of yesterday, they were only accepting more clients "if my secretary wants to kill herself," he joked.

The office will be working through the weekend to finish, he said.

Bankruptcy and tax attorney Edward Gonzalez is twice as busy as normal, putting in 60-hour weeks as the number of bankruptcy filers spiked.

Mr. Gonzalez has had to turn people away.

"The people calling [Thursday], I told them I can't do it, I only have so much time," he said.

Tom Ramstack contributed to this report.