ANCHORAGE - Alaskans scrambled to file for bankruptcy to beat the Oct. 17 date that brought stricter solvency requirements into law.
But 80 percent of those who filed could have waited, possibly cutting attorney costs, according to attorney Dee Ennis, of the Alaska Bankruptcy Center.
Between Oct. 1 and Oct. 16, the Alaska district of the U.S. Bankruptcy Court accepted 840 cases. The court took in 77 cases during that same time period last year, according to court clerk Wayne Wolfe. Some 1,509 cases were filed in all of 2004.
Ennis said she filed 74 cases in the first 16 days of October. Normally, she'd file that many in about three months.
"Half the cases we filed didn't need to meet that deadline," Ennis told the Alaska Journal of Commerce. "We screened a lot of people, and many of them were not even close to the new rules. People on Social Security were calling in a panic. People were so panic-stricken, they just wanted to file no matter what."
As the caseloads piled up, bankruptcy attorneys raised their rates. Attorneys Ennis and Frank Cahill, both of Anchorage, said they normally charge $1,000 to handle straightforward bankruptcy cases. As the deadline approached, and an overwhelming number of calls came in, both raised their fees to $1,750.
Ennis said that after things calm down, she plans drop her fee back to the normal range. Cahill said he will keep the higher fee because the new rules will require more work on his part.
The Bankruptcy Abuse Prevention and Consumer Protection Act took effect Oct. 17, marking the first major reform of bankruptcy laws since 1978. The act aimed to make it more difficult to file for bankruptcy, and to stem potential abuses of the system.
The new rules set up stricter eligibility requirements for those wanting to file for Chapter 7. Referred to as the liquidation chapter, Chapter 7 is filed by individuals and businesses who have no hope of getting out of debt. Their nonexempt property is sold for cash and the money is distributed to creditors.
Under the new rules, Chapter 7 can be filed if the applicant's monthly income - determined by taking the average income during the past six months - is less than the median income in the state. According to the U.S. Trustees, Alaska's median annual income is $76,369 for a family of four.
If the average income is above the median, and the applicant can pay $100 a month toward paying off debt - determined through a complicated formula using Internal Revenue Service and other government standards - then the applicant must file under Chapter 13, where a specified repayment plan is set up.