Filings for Bankruptcy Spiked in October

The following are excerpts from an article, written by Jenifer K. Nii, published in the Deseret Morning News on November 8, 2005.

More than 5,600 Utahns filed for bankruptcy in October. That's more than the number of filings during the previous three months.

Bankruptcy lawyers across the board say the spike is directly related to the change in bankruptcy law that went into effect in mid-October and likely does not represent a larger trend.

"The increase is directly related to the change in the law," said Duane Gilman, a Utah attorney and a bankruptcy trustee for 23 years. It happened for two reasons — one, the Congress and the creditor community got the word out that this new bill was going to make it more difficult to file for bankruptcy. Second, I think the debtor bar locally got that word out also. So, people who were considering filing went ahead and filed prior to the Act."

The Bankruptcy Reform Law, signed in April by Pres. Bush, went into effect October 17, 2005. It sets new limits on personal bankruptcy filings and requires people to get counseling before they are allowed to file petitions. The law also bars more filers with above-average income from filing Chapter 7. Instead, people deemed to have at least $100 a month left over after paying certain debts and expenses have to submit a five-year repayment plan under more restrictive Chapter 13 guidelines.

In the three months before the law was enacted, a total of 5,410 people filed for bankruptcy, short of the 5,680 who filed in the first few weeks of October.