BALTIMORE, Md. - What difference does a year make? Ask a bankruptcy attorney.
A year after the implementation of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, bankruptcy filings are still significantly off from what they were before the new law took effect last October.
"I can tell you I didn't see any clients between October 17 and the end of last year," said Baltimore lawyer Mark F. Scurti, who handles Chapter 7 and 13 bankruptcy cases.
While bankruptcy clients began to cross his threshold again in January - and the numbers of new clients have increased "tremendously" within the last two months - they are still half of what they were prior to October 2005, he said.
Part of the problem, he said, was that some debtors didn't even realize that they could still file for bankruptcy.
"Somehow word was out after October 17 last year that bankruptcy was no longer an option for people and that they were pretty much out of luck," he said. "Now that folks are finding out that that is not the case - we're starting to see the numbers coming back through our doors with respect to looking at bankruptcy as an option."
Lawrence F. Regan Jr., a Rockville lawyer who also handles Chapter 7 and Chapter 13 cases, attributes the downturn to more than confusion.
"A lot of people are not going to file their cases until they are compelled by circumstances to do so," he said. "The process is so unpleasant now that they are not going to do it until they are actually hit with the garnishment or they receive the notice of foreclosure in the mail."
The new law, intended to deter debtors from filing petitions for bankruptcy protection, pushes them into Chapter 13 reorganization and debt payment plans rather than Chapter 7 liquidation and debt forgiveness plans. It went into effect Oct. 17, 2005.
"In the opinion of my membership, it's not very friendly to consumer debtors or to their attorneys," said Douglas R. Gorius, chair of the Maryland State Bar Association's section on consumer bankruptcy. "It's especially hard on attorneys."
Despite the reduced caseload, individual cases now require significantly more paperwork and time before a bankruptcy judge, Gorius said. Many lawyers who used to practice bankruptcy law got out of the business altogether as a result; those who remain are more experienced but also are charging more for their services.
"I don't think Congress' goal of forcing more people into Chapter 13 has been achieved the way it was expected to be achieved," he said. "Lots of Chapter 7 debtors are now required to file Chapter 13, but not as many as the big banks and credit lenders had hoped. …