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November 2005

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This article is in the news archives --- for current news go to the Third Branch News.


New Law Creates Rush to File in Federal Courts

On Friday, October 14, 2005, the line of petitioners began forming outside the doors of the U.S. Bankruptcy Court in Los Angeles at 6:00 a.m. By noon, 450 people were in line. In Chicago, so many people were waiting in line, bankruptcy court staff began giving out numbers around noon to the people who’d been waiting since dawn. Over 400 people had already filed their cases and 634 numbers were given out. A similar scenario played out at bankruptcy courts across the country. In October 2005, more than 600,000 bankruptcy cases were filed nationwide; by comparison, in October 2004, filings totaled 130,679.

Many of the thousands of people filing for bankruptcy were trying to beat a deadline; most of the provisions of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 were due to go into effect on Monday, October 17.

"In the few weeks leading up to October 17, the filings in our court were astronomical," said Bankruptcy Judge A. Thomas Small (E.D. N.C.). Small, the immediate past chair of the Judicial Conference Advisory Committee on Bankruptcy Rules, recently testified before Congress on the many actions taken by the Judiciary to implement the new bankruptcy law.

"None of us anticipated this level of activity," said Northern District of Illinois Bankruptcy Clerk of Court Ken Gardner. "We had 3,613 cases filed on Friday, 1,500 of those over the counter. Chambers and court staff helped us out. On Friday, the last pro se case was filed just before midnight, then staff came back to work on Saturday and Sunday to enter creditors and open all the cases dropped off by attorneys on Friday."

From October 1 to October 16, 2005, 27,074 bankruptcy cases were filed in the Central District of California, compared to 2,292 cases for the same time period in 2004.

On Friday, October 14, the U.S. Bankruptcy Court for the Central District of California set an all-time record of 7,766 petitions; filings for the same day in 2004 were only 225. Law clerks, externs, purchasing clerks, and any available court personnel worked case initiation departments, managed lines, reviewed petitions, or performed any number of tasks to assist intake window clerks.

"Several attorneys from the local bar reviewed petitions from pro se filers for completeness prior to reaching the windows," said Central District of California Bankruptcy Clerk of Court Jon Ceretto. "One judge was hearing installment fee applications in the intake areas in order to speed the lines along."

In an unprecedented step, the LA office opened up a staffed drop box on Sunday, October 16. Petitioners lined up prior to the 10:00 a.m. opening time and by 7:00 p.m., 1,338 petitions had been received.

In an October 17 memo to all bankruptcy clerks, Administrative Office Director Leonidas Ralph Mecham congratulated the entire bankruptcy court community "for their Herculean efforts over the last week in managing an unprecedented level of filings."

"The dedication of our employees was incredible," said Chief Bankruptcy Judge Karen Overstreet (W.D. Wash.). "They were efficient and caring, recognizing the ordeal these last-minute filers were going through."

Ceretto agreed. "In spite of the long lines, a sense of teamwork prevailed," he said, "even among the filers, who shared stamps, envelopes, advice, and information. Many expressed gratitude and appreciation to the staff of the clerk’s office for all the help they received throughout the day."

"We opened our doors Saturday and Sunday to help people file throughout the weekend," said Jim Waldron, bankruptcy clerk of court for the District of New Jersey. "And staff were in the office every night until 10 or 11:00 p.m.. They did an amazing job."

"People waiting in line commented on how professional and friendly staff were, even at 11:00 at night," said Gardner. "We pulled together. And I’ve heard from many courts that experienced the same thing. We turned a crisis into one of our greatest successes."

Adding to the potential for crisis was not just the volume, but the many pro se filers who were unprepared and uninformed. "Some people came in with nothing, no forms, nothing," said Gardner.

"Debtors showed up with checks but no paperwork," said Ceretto, "hoping to pay the filing fee and file for bankruptcy without a petition or the other required paperwork. More often than not, papers were lacking, or mixed-up."

Said Small, "Some people thought it was like a tax return; if it was postmarked by October 17, it was filed on time. Or they used the wrong form, or filed without a certificate."

"It was sad," said Overstreet. "So many filers were unrepresented by counsel. They had not been advised whether bankruptcy was even the best course of action for them. But the available bankruptcy lawyers couldn’t handle the capacity. People had to file without advice. Now many of those debtors have additional papers to file or their cases could be dismissed."

When it was over, court staff across the country agreed on one thing: "We could not have done this without electronic case filing," said Gardner. "Normally, we have 200 bankruptcy filings per day, maybe 300 to 400 on a really big day. On Saturday, October 15, our filings were 15 to 20 times our normal activity. We had 4,828 cases filed electronically, with 2,095 on Sunday."

Adds Gardner, "During the crush of filing on Friday, our court disabled access for attorneys to electronic case filing so that we could finish the pro se filers. When we enabled the system again at midnight, we had 50 cases filed by 1:00 a.m. We had people filing 24/7."

In New Jersey, most of the 15,000 bankruptcy cases filed in the court between October 1 and October 16 also were filed electronically, according to Bankruptcy Clerk of Court Jim Waldron. "And the electronic filing system never failed, not once," he said.

"Most of the our last-minute bankruptcy cases were filed electronically," said Small, "with a substantial number filed on Saturday and Sunday. There were so many, there was a concern in our court that the system might go down. We had a contingency plan, but no problems were encountered."

Now that the bankruptcy law has gone into effect, filings have dropped off dramatically. "This week was fairly dead," said Gardner, "with counter activity around 100 cases. Those who need the protection of bankruptcy will continue to seek it."