An estimated 1,200 people filed for Chapter 7 bankruptcy protection in Denver on Wednesday – more than 10 times the normal level – beating a deadline to file before a tough new law takes effect.
The law, effective Monday, makes it more difficult for higher-income earners to wipe away debts in Chapter 7.
A line of about 70 people stretched through the hallway of U.S. Bankruptcy Court in downtown Denver on Wednesday. They waited for up to 90 minutes to give an administrative clerk $209 and a pile of paperwork that chronicled their finances.
“I expected it to be worse since it’s getting so close to the deadline,” said Aaron Davis, 32, of Parker. He spent the past two weeks rushing to finish his paperwork.
The Denver court took 1,260 filings Tuesday, shattering the record of 676 set Friday, said Court Clerk Bradford Bolton. He expected a similar number Wednesday when the count is tallied and perhaps as many as 2,000 Friday.
“It’s been unbelievable,” he said. “I didn’t think we’d hit 1,000 until Friday.”
Most of the cases – about 1,000 on Tuesday – were filed electronically by lawyers on behalf of their clients. Bankruptcies under the current law can be filed electronically until 11:59 p.m. Sunday, Bolton said.
Those waiting in line with papers generally were filing by themselves without an attorney. Their deadline is 5 p.m. Friday. Bolton recommends that people come earlier in the day, and no later than 3 p.m. unless they want to stay well into the evening. Identification is required, and the court does not accept personal checks, he said.
Like others in line Wednesday, Davis said he saved money by filing himself. “I’m going bankrupt. I don’t want to pay a lawyer $2,000,” he said.
Davis recently got divorced and said that living a two-income lifestyle on his single income pushed his credit-card debt, including fees and interest, to $50,000. The mutual-fund analyst said he earns more than the state’s median income of about $51,000, making him a target of the new law.
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 will force higher-income filers into Chapter 13 if the court determines they can pay $100 or more a month toward debt reduction. There, unlike in the more lenient Chapter 7, they will have to pay back some or all of their debts over a five-year period.
Bankruptcy courts across the country have received record filings in recent months. In Denver, Chapter 7 filings more than doubled in September to 5,057 over September 2004. They’re up 35 percent so far this year over this time last year. Experts expect the numbers to drop off drastically beginning Monday.
Greenwood Village bankruptcy attorney Jon Clarke said Wednesday that he worked seven-day weeks in September to meet the demand.
“I’m going to file my last batch tomorrow, and then I’m leaving town,” he said. “We’re pretty burned out at this point. We’ve been functioning at top speed for the last couple of weeks.”
Federal bankruptcy-court workers may not be able to take a vacation soon. The new law requires new processes and procedures that are still being worked out, Bolton said. The courts also must deal with a huge backlog of cases that has built up in recent weeks.
Staff writer Greg Griffin can be reached at 303-820-1241 or ggriffin@denverpost.com.
What will change
Higher-income filers will be forced into Chapter 13 if the court determines they can pay $100 or more a month toward debt reduction. There, unlike in the more lenient Chapter 7, they will have to pay back some or all of their debts over a five-year period.
