New laws are going to make it more difficult to declare personal bankruptcy. There has been a large increase in the number of people filing for bankruptcy to try to get in before the law goes into effect.
Lawyers see bankruptcy explosion
Last fall, the Debt Relief Legal Clinic was the busiest bankruptcy law firm in San Diego, filing 90 personal bankruptcy cases in September and October.This year, the firm expects to file more than 330 during the same period.
“I’ve never seen anything like it,” said John Colwell, president of the firm, which operates five offices in the county. “Since the end of September, we’ve been referring people to other attorneys because we just couldn’t handle any more cases.”
That scenario is repeated from bankruptcy attorney to bankruptcy attorney in the region, as individuals scramble to file before the most sweeping bankruptcy reform in a generation occurs Oct. 17.
“There will still be bankruptcy after Oct. 17, but it’s hard to tell that from the way people are acting,” Colwell said.
The new law makes it more difficult for a debtor to qualify for Chapter 7 bankruptcy, the easiest and most expedient form of personal bankruptcy. Under Chapter 7, individuals are allowed to virtually wipe out all debt, except for items such as child support, student loans and most taxes.
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