Thursday, October 20, 2005

On Bankruptcy....

Newcomers, my partner is a bankruptcy attorney, I work in the office. The last three weeks have been....busy. Some interesting news.

The US Trustee has reported that over 205,000 bankruptcy cases were filed LAST WEEK. The number of filings for October appears to be easily over 250,000 and it may approach 500,000 since mid September....we filed the equivalent of 4-5 months worth of cases last week. Amazingly, the electronic case filing system seems to have held up under the onslaught...however, one thing has fallen apart. Each bankruptcy case is assigned to a trustee that reviews and administers the case. Most trustees hand 75-150 cases per cycle. Right now, their load is closer to 500 (guessing based on our experience in our two districts and reports from other districts). The law requires that a hearing on the case be held no earlier than 20 days after filing but no later than 45 days after filing. Due to the load, hearings are being set WELL outside that time frame. Some districts are setting hearings as late as MARCH 2006. This is probably ok as there will be very few filings over the next three months.

There have been several rulings dealing with the new law provisions already active, among the most interesting is that Arizona and Minnesota homesteaders are not bound by the $125,000 equity caps...primarily because the law says that if you choose state exemptions, the bk law can limit the exemption to $125,000. In Arizona and Minnesota, no choice is possible, therefore, the limit is not applicable. On Monday a ruling in Georgia came down that said that attorneys admitted to the bankruptcy bar are NOT Debt Relief Agencies under the bk law. One provision in particular was cited as damning - attorney regulation is a STATE responsibility...any attempt by the bk law to regulate attorneys would be a federal intrusion into state domain and as no one seems to have brought that up before, it must mean that the law was not intending to regulate attorneys. This law is going to be such fun...

Some interesting anacdotes: an attorney mailed petitions to the court on Friday...they got sent back - there is no mailbox rule. Cases are not filed until they hit the clerks desk. We had a potential client slip a small retainer fee with a note under our door asking for an emergency filing, sometime after 2pm Saturday when I left the office but before 11am Monday when I returned. Needless to say, no emergency filing. They had been in our office on 10/4 and were informed that all fees and paperwork had to be in by 10/12....too late. And given the need for a lot of preparation for filing under the new law, we could not prepare a petition before their home would be sold at foreclosure auction next week.

If 500,000 cases were filed in the last 30 days leading up to the law change, AND each case had at least $10,000 in unsecured debt (our average was closer to $40k), then $5,000,000,000 (billion) in unsecured debt was cleared away from consumers.

UPDATE: Victoria attended CLE on Friday and the clerks from the BK Court said that as of last Friday, 19 cases had been submitted after the law change, all were mailed on Friday 10/14 and all were wrong and returned.

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