Today’s Atlanta Journal-Constitution reports that Georgia now leads the nation in bankruptcy filings. More bankruptcies were filed in Georgia in 2006 than in any other State. Over 29,000 petitions were filed in Georgia during the first three quarters of 2006, surpassing California (27,000 petitions), Texas (almost 26,000 petitions) and Ohio (25,000 petitions).
Even more significant, Georgia ended up just behind Tennessee in the number of bankruptcy petitions filed per 1,000 residents.
Compared to 2005 – the last year of filing under the “old” law, bankruptcy filings throughout the country are way down. From January – September, 2006, 29,202 cases were filed. For the same time period in 2005, however, 60,143 cases were filed. Thus, filings in Georgia dropped 51% – almost 30,000 filings.
What exactly does this all mean?
From my perspective as a consumer bankruptcy lawyer, I can make several observations:
- during the run-up to the new law – January through October 16, 2005 – a lot of people made the decision to file because of (legitimate) concerns about the impact of the new law. Thus, the “inventory” of potential filers in 2006 decreased greatly.
- there is a perception in the general public that bankruptcy relief has become much harder to obtain. There is some anecdotal evidence that bill collectors perpetuate a number of inaccuracies about the availability of bankruptcy relief.
- the bankruptcy process has become much more burdensome and expensive. From the useless requirement of credit counseling to the need to produce tax returns, pay stubs and expense receipts, many individuals who might benefit from filing continue to procrastinate because they do not want to spend the time gearing up for a filing. Similarly, the amount of work done in my office has easily doubled, and I have had to increase my fees to account for the added work.
- as a practical matter, bankruptcy relief is no longer available to a significant slice of the population. Families with household income that slightly exceeds the State median (i.e. $65,000 for a family of 4) cannot qualify for Chapter 7 without a stressful and expensive fight, yet these same families cannot afford a Chapter 13 payment.
- fewer lawyers are willing to brave the chilly waters of bankruptcy. Many experienced and capable attorneys are dropping the practice because they cannot find clients who can pay for their time and because the law has become so internally inconsistent as to make it all but impossible to offer clear advice. Most bankruptcy petitions will be filed by one or two high volume firms in a particular jurisdiction.
- many debtors who have been forced into Chapter 13 because of the strict limitations on Chapter 7 will end up with failed repayment plans because their Chapter 13 plans are not feasible over the long term. Taken in combination with the limitations on refilings, we will soon see a class of “permanent debtors” who will live with the burden of constant wage garnishment and involuntary liens.
In many ways, bankruptcy practice has become like tax problem practice. I can offer my clients relief, but not without significant pain. Bankruptcy is no longer about getting a fresh start – it is about managing pain.