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Bankruptcy's New Era
Total filings have started to creep up. Two weeks ago, they hit a weekly rate of 15,000 -- halfway to the 30,000 level that was typical before the new law.
Filings such as Moore's under Chapter 13 may indicate a shift. While the number of total filings is down, the portion that are under Chapter 13 has risen significantly in the last year, accounting for about 40 percent of personal filings, up from 30 percent before the new law took effect.
  Sharon Moore filed for Chapter 13 protection in July after her restaurant failed. Since then, she said, "the creditor calls have stopped, and I can breathe again." (By Herb Swanson For The Washington Post) 
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"It's just too early to draw any grand conclusions," said Samuel J. Gerdano, executive director of the American Bankruptcy Institute, a nonprofit, nonpartisan research group. He said one reason that lower-than-expected filings have persisted is that people might be afraid or misinformed. He has heard of anecdotal evidence that some debt collectors are incorrectly telling consumers that the new bill bars bankruptcies or makes it nearly impossible to file, though no one has studied the matter.
"It's very possible there's consumer misunderstanding about the extent bankruptcy protection's available and at what cost and at what hassle," Gerdano said.
The National Association of Consumer Bankruptcy Attorneys, which has opposed the law from its inception, said a survey of its members shows the new law is "failing on an across-the-board basis," adding little except paperwork and expense.
One part of the law that is being closely watched is a requirement that people seek credit counseling from a nonprofit agency approved by the Justice Department. The Internal Revenue Service earlier this year said it would seek to revoke the tax-exempt status of at least 41 of the nation's largest credit counseling agencies, which account for 40 percent of the industry's revenue, saying the firms appear to be primarily interested in making a profit rather than helping debt-burdened consumers.
The section of the Justice Department that oversees the nation's bankruptcy system is the U.S. Trustee Program. Its budget comes from the fees people and businesses pay to file for bankruptcy, and so far, it's approved 150 credit agencies to provide counseling.
Privately, program officials have expressed dual concerns that if bankruptcies return to former levels, there will be a critical shortage of approved counseling agencies. At the same time, if bankruptcies stay unexpectedly rare, the program may find itself short of operating funds.
Trustee Program spokeswoman Jane Limprecht would only say the program has adequate funding and that there will be sufficient counseling if filings increase.
The National Foundation for Consumer Counseling, which represents many nonprofit firms, yesterday released a survey of its members that found that the industry has been able to handle the volume so far. But the survey also found that a firm's average cost of counseling a person is $50 but that on average it can collect only $40 to pay those costs.
