Record for bankruptcies

'05 filings up 54% despite slower pace after change in law

John Accola, Rocky Mountain News

Published December 23, 2005 at midnight

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A dramatic falloff in Colorado bankruptcies since mid-October will still leave the state with a record year of filings - up a staggering 54 percent from 2004.

As of Thursday, bankruptcy petitions in 2005 already exceeded the 43,000 mark. Last year's filings totaled 27,993.

Brad Bolton, clerk of Denver's U.S. Bankruptcy Court, said his staff's single busiest day came on Oct. 14, a Friday, when 3,364 cases were entered on the docket.

Debtors rushing to file before a stricter law took effect the following Monday formed a line that filled the court's hallways and stretched out to the sidewalk.

The drop-off in petitions after the new law was immediate, he said.

In November, just 130 cases were filed. December filings have more than doubled to 281 but aren't likely to break 400 by the end of the month, Bolton said.

Even with the sharp drop-off, Bolton said, there remain plenty of Coloradans headed for financial trouble.

"We've been telling people that the lake drained, so there's not a lot of water," Bolton said. "But it's still raining. People are not changing their spending habits."

Denver bankruptcy attorney Mindy Greenwald said a good gauge of future bankruptcy filing levels will come in mid-January when consumers get credit-card bills filled with holiday charges.

After Jan. 1, on top of the traditional overspending hangover, new rules will require some credit-card companies to raise cardholders' required minimum monthly payments. Some consumers could see their minimum monthly payment double.

The higher minimum payments come at a time of higher interest rates on adjustable mortgages and home equity loans.

"While there has definitely been a slowdown, people should know that bankruptcy is still an option when their finances are just beyond control and their resources are tapped," Greenwald said.

Under the new bankruptcy rules, debtors must undergo credit counseling within 180 days of filing their bankruptcy applications. The law also requires debtors to enroll in a financial education class before their bankruptcies are final.

The extra legal hoops are designed in part to steer people away from Chapter 7 bankruptcy, where most debts can be wiped out entirely, to a less-forgiving Chapter 13.

In a Chapter 13, the bankruptcy court requires debtors to set up a plan to repay a percentage of their debts over an extended period.

Flood of filings

• More than 43,000: Bankruptcy petitions in 2005 as of Thursday

• 27,993: Filings in 2004

• 3,364: Number of cases entered on Oct. 14, the busiest day of Denver's U.S. Bankruptcy Court

accolaj@RockyMountainNews.com or 303-892-2666

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