SIKESTON - Once Oct. 17 rolls around, it's going to be more difficult, more expensive and more time consuming for debtors to file for bankruptcy.
"They've (Congress) tightened it up a little bit, making it a little bit harder for people who have higher incomes to get a total discharge from all of their debts," said John David Moore, attorney at law with Moore Law Offices.
"It's a really drastic change from what we've done," said Rice "Pete" Burns Jr., attorney at law with Burns, Taylor, Heckemeyer and Green LLC in Sikeston. "It's a longer, more drawn out, more detailed process."
These changes are so vast, it is hard to summarize all of them, Burns said. But, one of the modifications is a requirement to attend credit counseling before and after filing for bankruptcy, in order to get a discharge from their debts.
The filing fee will also increase from the current $209 fee to $274. Counseling and the rise in the filing fee will mean an increase of at least $115 for debtors to incur. Debtors will also have to provide copies of their tax returns to the trustee and to any creditor that requests a copy, Burns said, which will also increase costs.
But that won't be the only added expense for those wishing to file for bankruptcy. The new law will also require means testing.
"We have to look at how much money they make, and figure an average income for the previous six months," Burns said. "Now, we just look at the current income, not an average."
A detailed, four-page form will replace the current two-page form, which will take more time and work for lawyers to fill out. Special software will be needed to determine average income, with both of these costs driving up the cost for a debtor to file bankruptcy.
Then if someone's average income is above the median income for the state, as determined by the Census Bureau, they must go through another series of tests, and may require the filing of a Chapter 13 payment plan, instead of a Chapter 7 case, where all the bills are discharged.
"More people who would typically qualify for a Chapter 7 will now be put in Chapter 13," Moore said. However, he and Burns don't see that affecting too many local citizens, since incomes in this area are at or below the state median average.
But increased costs and counseling sessions will affect them. And that's why Burns and Moore have both seen drastic increases in the number of bankruptcy cases they handle each month.
"They're very concerned about it - everyone considering bankruptcy should seek the advice of an attorney prior to October," Moore said. "The number of people I'm seeing and the filings has doubled.
Burns, who is also a trustee, agreed. "I usually see a minimum of 60 cases a month, and the last few months it's been 120 cases," he said.
And it will only get busier in the months to come, they predicted. All of the paperwork is filed electronically, so if debtors wait too long, they may risk not getting their paperwork filed, if hundreds of lawyers are all trying to access the electronic case filing system.
The lawyers urged anyone having financial woes to see an attorney as soon as possible. Moore also urged those contemplating divorce who are financially distressed to consult a lawyer prior to filing for divorce. "There have been some changes in the rules that can affect your ability to discharge joint debts," he said.
Since the new bankruptcy codes will require more paperwork and new software, Burns also predicted fewer lawyers covering them. "I think they (attorneys) are going to become more specialized - more so than they are today," he said. "It's not profitable to invest in the software for one or two cases a year."
The new law mainly came about after four or five years of lobbying by credit card organizations, Moore said. "They spent about 45 million dollars trying to get this law passed," he said.
He blames credit card companies for contributing to consumer debt. "I believe that most of the bankruptcies are caused by the credit cards giving too much free credit," Moore said. "In a lot of cases, they've created the problem and now they've made rules to make it more difficult to get relief from bankruptcy."
In the future, filing for bankruptcy may be more expensive, but it will still be a benefit for most people, Moore said. He urged all with excess debt or considering debt consolidation to consult a lawyer.
"People shouldn't be scared (to file)," Moore said.