Local bankruptcy trustee's best guess is that filings will pick up again in Spring
BY JULIAN BENBOW
TIMES-DISPATCH STAFF WRITER
Tuesday, December 27, 2005
Chapter 13 bankruptcy trustee Robert Hyman said about 450 cases came through his downtown office in the last three months of 2004. The total so far in the same span this year: 25.
After the historic spike in bankruptcy filings just before Congress' bankruptcy-reform bill took effect in October, filings fell off locally and nationally. Hyman guessed that activity will pick up again in the spring, but at this point he admits that a good guess is about all he has.
"It's a crystal-ball call," said Hyman, one of three Chapter 13 trustees in Virginia. "You figure Christmas debt will start catching up around February, so around April you can [anticipate] some filings."
Just not at the same pace as before.
More than 4,100 area residents filed for bankruptcy protection at the federal court in Richmond in October. Last month, only 86 consumer petitions were filed. While the dropoff might suggest that consumers' financial woes aren't as bad as advertised, Hyman said that doesn't necessarily mean people aren't swimming in debt.
"The same people that had financial troubles on Oct. 1 still had financial trouble on Nov. 1," he said. "I just think that really anyone who thought about [filing for bankruptcy] has already done it.
"There are always going to be unforeseen circumstances. But I don't think it's ever going to get back to where it was."
The change in the law was meant to balance the filing system for debtors and creditors by making it more difficult to file for Chapter 7 bankruptcy -- liquidation -- and encouraging credit counseling and Chapter 13 bankruptcy -- reorganization of debts.
While Chapter 13 filings outnumbered Chapter 7 filings in November by 3 to 1, the 65 Chapter 13 filings was still dramatically lower than the 433 filed in November 2004.
Deanna Hathaway, a bankruptcy attorney with the Boleman Law Firm in Richmond, said she had monitored the buzz about bankruptcy reform but "wasn't entirely sure that it was going to be that drastic."
She said case volume at the firm is starting to pick up again after a post-Oct. 17 falloff. The truth is that people will always have financial troubles, whether it's from piling up credit-card debt or as a result of a sudden catastrophic illness or an expensive divorce.
"There's an assumption that you can ultimately avoid [filing for bankruptcy], but in some cases you can't," she said. "In some cases, it stops the clock. It levels the playing field. It allows people to maintain their dignity and integrity."
Bill Redden, clerk of the U.S. bankruptcy court in the Eastern District of Virginia, said that the largest number of bankruptcy filings historically come in the first quarter of each calendar year. Although he has seen "a very modest increase" in filings in recent weeks, there's no way to judge when or if numbers will return to normal.
"We don't have any direct way of telling, but if this bounce-back happens, it could happen in the new calendar year," he said. "When it turns around and how drastic that turnaround will be is simply unknown."
