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Bankruptcy filings continue to rise

September 11, 2010|By ARNOLD S. PLATOU
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o For those buried in debt, bankruptcy is a lifeline

o Creditors lose when customers file bankruptcy

The latest statistics from http://www.uscourts.gov, which tracks such records, show that in the 12 months from April 1, 2009, to March 31, 2010, a total of 1.5 million cases were filed.

That's 27 percent more than the 1.2 million filed during the previous 12 months.




The young woman was well-spoken, so the bankruptcy official was puzzled when she hesitated before giving her home address.

"She turned to her attorney and the attorney told me, 'She's homeless. She lives at the (convenience store) around from my office. I'm letting her use my address so she can get correspondence from the court.'"

Cheryl E. Rose, a trustee for the U.S. Bankruptcy Court, said she was surprised at what that told her about people and the current economic conditions.

"Now, I realize there are homeless people, but to come to this level?" Rose said. "It really affected me. It was very disturbing to me."

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Rose hasn't seen many such debtors yet, but it is clear that the nature of the dozens of cases she hears throughout Maryland each month is changing.

Two or three years ago, "at the beginning of the really bad turn in the economy, a lot of people had multiple houses," Rose said.

"They were people who thought they were going to be real estate investors," as loans were so easy to get that the housing market was roaring and prices were soaring. "And then, they got caught" as the price bubble burst and the market collapsed, Rose said.

Back then, many people filing for debt relief owned two, three or more houses, but with the speed that prices had dropped, they suddenly had no equity, Rose said.

"Now, you're getting back to your more standard sort of Chapter 7 debtor who has little in the way of assets, nothing that is of value -- and a lot of debts. We aren't getting as many multiple houses as we were. Not as many investor types," she said.

"Now, I would say we see, predominantly, cases with lots of unemployment," she said.

"Today, we probably see more middle-to-upper income" debtors who have lost their jobs or whose jobs have been cut to part time -- and who have exhausted any equity out of the homes to try to pay debt.

"Also today, a lot of people are trying loan modification so they can still afford" to keep their homes, she said.

More hearings

Nearly three years after the recession began, the number of bankruptcy filings across America continues to rise.

The latest statistics from http://www.uscourts.gov, which tracks such records, show that in the 12 months from April 1, 2009, to March 31, 2010, a total of 1.5 million cases were filed.

That's 27 percent more than the 1.2 million filed during the previous 12 months.

And it's more than double the 695,575 filed just three years ago, after Congress made it more difficult for people and businesses to qualify for bankruptcy protection.

In Maryland, the clamor for bankruptcy help has grown even faster.

Statewide, from April 1, 2009, to March 31, 2010, a total of 27,642 cases were filed.

That's 43 percent higher than the number filed in the state the previous 12 months. And it's nearly three times the 10,503 filed three years ago.

On a Monday in August, Rose sat at a table in the Hagerstown City Council chambers on the second floor of City Hall and presided over a total of 59 bankruptcy cases.

There are two bankruptcy hearing days here every month -- usually, every other Monday.

Even that isn't enough, Rose said.

She said people whose cases can't be fit in on one of those days have to drive to a hearing in Greenbelt, Md.

Hagerstown "would be serving its citizens better" if it could find a way to let the court use the council chambers more often, Rose said.

City Clerk Donna Spickler said the city lets the court use the big meeting room for free, and that as recently as January, the city let the bankruptcy court use the room four days a month.

But, Spickler said, the problem is that many organizations want to use the room, so the city asked the court to try to cut back. In February, the court used the chambers on just three days and, starting in March, just two days, she said.

Seeking relief

The people who come from throughout Western Maryland to the hearings in Hagerstown have filed for what is called Chapter 7 bankruptcy. This means they have little in the way of assets left to protect.

In Chapter 13 cases, which are held in Greenbelt and Baltimore, the debtors still might own a house in which they have enough equity that by holding off creditors for a few years, they can agree on a plan to try to catch up on the bills.

As a bankruptcy court trustee, Rose oversees the Chapter 7 cases assigned to her.

The kind of debt "runs the gamut -- medical bills, credit cards, foreclosure debt, department store credits, " she said. "... Occasionally, it is the doctor's bills."

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