April bankruptcy filings jump nearly 15% over 2004 in Oklahoma's

Journal Record, The (Oklahoma City), May 5, 2005 by Journal Record Staff

Bankruptcy filings in April shot up nearly 15 percent in Oklahoma's Western District compared to the same month last year. Some say the trend is a response to recently passed federal legislation that will make it harder to discharge debts.

There were 1,579 filings last month, all but 154 of them under Chapter 7 of the bankruptcy code, which provides for complete liquidation. Year to date, filings are up slightly more than 5 percent from 2004. But the trend changed substantially in March, when the U.S. Senate passed the bill that President Bush signed into law April 20.

March filings in the district were up 12 percent. In the first two months of 2005, filings were down almost 35 percent from the preceding year.

It was the biggest rewrite of U.S. bankruptcy law in a quarter century.

About 1.5 million Americans file for bankruptcy each year, the American Bankruptcy Institute reported. In Oklahoma, nearly one household out of 56 filed for bankruptcy last year, the nonprofit organization said.

The new law sets an income test for measuring a bankruptcy applicant's ability to repay debts. Those with insufficient assets or income can still file a Chapter 7 bankruptcy after the forfeiture of certain assets and have their remaining debts erased entirely. But filers with an income greater than a state's median - $35,500 in Oklahoma, according to the U.S. Census Bureau - who are able to pay at least $100 a month will instead go into Chapter 13 with a repayment plan that would include credit card charges, medical bills and various other obligations previously avoided under the bankruptcy laws.

The floodgates have opened wide, Oklahoma City bankruptcy lawyer Jerry Brown told The Journal Record when the bill was signed.

Grant Price, clerk of the U.S. Court in the Western District of Oklahoma, predicted last month that the trend would last about six months.

We anticipate filings to increase substantially for the next six months, Price said, noting the scheduled delay before the federal law takes effect. And then we'll see them drop off considerably for a period afterwards.

That's not anything scientific; it's just common sense with me. I figure lawyers will tell their clients, 'Let's go ahead and file while we can take advantage of the old law,' he said.