Copyright 2002 The Denver Post Corporation
The
Denver Post
July 9, 2002 Tuesday 1ST EDITION
SECTION: BUSINESS; Pg. C-02
LENGTH: 623 words
HEADLINE:
Colo. bankruptcies rise as new law looms
BYLINE: By Tom
McGhee, Denver Post Business Writer,
BODY:
The
number of Colorado bankruptcies is soaring and likely to go even
higher as federal lawmakers get closer to passing a tougher
bankruptcy law.
Filings at U.S. Bankruptcy Court in Denver rose to 5,588
in the second quarter - 7 percent higher than the same period
last year. The biggest increase was in liquidations, or Chapter
7 filings, which rose to 4,851 in the quarter from 4,619 last year.
Colorado has so far managed to avoid the national trend
for record-setting bankruptcies.
It's too early to tell if
the total this year will shatter the 19,075 record set in 1997, said
Jack Yee, assistant chief deputy for technology at the bankruptcy
court.
Federal lawmakers have been trying to overhaul bankruptcy
law since 1997. Last year, when the bill seemed destined for
approval, people who were teetering on the edge of financial
collapse flocked to bankruptcy courts in Colorado and elsewhere to
file before the bill became law.
At the heart of the
legislation is a means test that would force more debtors out of
Chapter 7 and into Chapter 13. Chapter 7 requires debtors to sell
property to pay off some debts but allows them to escape payment of
credit card debt and other bills. Under Chapter 13, debtors are held
to a payment plan approved by their creditors.
The proposal
lost steam after the economy hit the skids and for a while it looked
like it was dead, said Samuel J. Gerdano, executive director of the
American Bankruptcy Institute in Virginia.
But when the
economy began to turn around, the bill, which is supported by credit
card companies and banks, drew new attention.
Sen. Charles Schumer,
D-N.Y., amended the proposed bill to ensure that protesters who block
access to abortion clinics don't use
bankruptcy regulations to dodge court-ordered fines.
Republicans opposed that amendment, and the resulting
dispute stalled the measure's progress through a House-Senate
conference committee.
That committee is close to resolving
the disagreement, Gerdano said. Debtors would have 180 days to file
under the old law once the president signed the new one.
'Most debtors' attorneys understand that the new law is
going to be much less debtor-oriented, so they'll encourage
their clients to file and that will eventually artificially grow
the numbers right through the balance of this year,' Gerdano said.
There is no way to predict how high the numbers would rise,
Yee said.
But one bankruptcy lawyer predicted an explosion of
new filings if the bill passes. 'It will be an avalanche,' said
Paul Rubner, a lawyer with Rubner Padjen and Laufer. 'Anybody
who practices this kind of law properly gives their client the
advice that if there is a choice in timing, they should file
sooner rather than later.'
Yee has heard about the bill's
resurgence in Congress, but he is not convinced it will pass.
'We thought it was going to pass last year I'm
not going to hold my breath,' he said.
Chapter 7s make up the
bulk of bankruptcies in Colorado and elsewhere.
Chapter 7 of
the U.S. Bankruptcy Code requires the petitioner to liquidate
property to pay off debts but grants exemptions that make it possible
to keep vehicles and other property. And it assures that creditors
can't put a lock on future earnings, said Bart Burnett, a bankruptcy
lawyer with LeBoeuf Lamb Greene & MacRae in Denver.
If
the bill passes, the number of Chapter 7s would fall as more people
were forced into Chapter 13. There were 709 Chapter 13 bankruptcy
filings in Colorado during the second quarter. Another 28 filings
were Chapter 11s, or reorganizations.
GRAPHIC:
The Denver Post Bankruptcy filings climb
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