« Ind. Decisions - More on Federal Judge Barker upholds state's no-call list | Main | Ind. Gov't - State ag leader questions CAFO denial »
Sunday, September 18, 2005
Law - Bankruptcy deluge floods courts as deadline approaches
The Munster (NW Indiana) Times has a lengthy story today by Keith Benman, headlined "Bankruptcy deluge floods courts as deadline approaches." Some quotes:
The new bankruptcy law that kicks in Oct. 17 is prompting a rush to the courthouse as people take advantage of what may be their last chance to wipe out credit card and other unsecured debt.Filings for Chapter 7, the bankruptcy that allows debtors to start over with a "clean slate," leaped 49 percent in the second quarter of this year in Northwest Indiana, according to figures from U.S. Bankruptcy Court for the Northern District of Indiana.
The second-floor clerk's office in Hammond's limestone-sheathed federal courthouse took in 22 such filings per day, or 1,426 in all, from April through June. It took in 956 such cases in the previous three months. * * *
Northern Indiana in 2002 had the dubious distinction of leading the nation in Chapter 7 bankruptcies per household, with households here filing at a rate almost twice the national average.
With the end of the steel crisis and a recovery in manufacturing nationwide, the situation in Northern Indiana has improved, with its bankruptcy ranking sinking to fifth in the nation earlier this year.
It will be some time before any trends can emerge from the current leap in Chapter 7 bankruptcies here. People also have started filing more Chapter 13, or "wage-earner" bankruptcies, as they get wind of the fact the new law affects Chapter 13 as well.
Paul Chael, Chapter 13 trustee for the Hammond Division of U.S. Bankruptcy Court for the Northern District of Indiana, reports at least 250 Chapter 13 cases were filed in August. That marks a 34 percent increase over the July mark of 186 cases filed.
Once the new law goes into effect on Oct. 17, Chael expects fewer than 10 percent of people who currently would be eligible for Chapter 7 to be pushed into Chapter 13. But that still could lead hundreds more debtors to his Merrillville office. It has a staff of 16 to handle its current load of about 4,400 cases. * * *
One of the biggest changes in the new law is the requirement that people get credit counseling before filing for bankruptcy. And those in Chapter 13 will have to take money-management classes before the case can be discharged and debts finally cleared.
On the surface, those seem like common-sense requirements. But those who deal with the system every day say it could lead to delays where people could end up losing homes or the family car.
They also fear predatory lenders may take up the mantle of "credit counselors" simply to get people in the door to sell them high-interest consolidation loans.
The Consumer Credit Counseling Service of Northwest Indiana is applying for certification for both the pre-filing credit counseling and teaching the money-management classes later, according to Lynne Balkema, a debt counselor at the nonprofit.
To avoid predatory lenders masked as credit counselors, Balkema advises people to make sure the counseling agency is a member of the nonprofit National Foundation for Credit Counseling.
The idea behind the credit counseling and classes is good, Balkema said. And she thinks people may take a closer look at her agency's debt-management program as an alternative to bankruptcy.
But even Balkema questions the value of the classes for many people, whose downfall was not poor money management, but simply unpreventable misfortune.
"You don't need to teach people who are uninsured and have $100,000 in medical bills how to manage their money," Balkema said. "What they need is health insurance."
Posted by Marcia Oddi on September 18, 2005 08:31 AM
Posted to General Law Related | Indiana Courts