Record numbers of people have filed for bankruptcy in Buffalo this year, hoping to escape their debt before tougher laws kick in Oct. 17.
But debtors aren't alone in their rush to prepare for the changes.
Bankruptcy judges are cramming to study new rules that will change the way cases are handled, and lawyers are attending crash-course seminars, searching for answers to questions their clients have already been asking.
"It's like the Wild West," said Jeffrey Freedman, a Buffalo-based attorney. "We know what the rules say, but we don't know how they're going to be interpreted. There's no case law to study yet. This is a new deal."
The law signed in April by President Bush will make it more difficult for people to have their debt wiped out in Chapter 7 bankruptcy, forcing more people to pay back at least part of what they owe.
Those who make more than their state's median income -- New York's is $55,309 for a single person and $67,564 for a family of four, according to the U.S. Census Bureau -- and can pay back at least $6,000 of their debt over five years will have to file under Chapter 13, which requires adherence to a repayment schedule.
Under Chapter 7, debtors forfeit most of their assests to cover part of their debt, and much of their remaining debt is erased.
Anyone who files for bankruptcy also will have to participate in court-approved credit counseling and debtor education courses.
Those new requirements, plus uncertainty about the long-term effects of the new law, have resulted in a rush to bankruptcy courts both locally and nationwide.
National filings in the third quarter of fiscal year 2005 -- April 1 to June 30 -- were up 11 percent over the same period in 2004, according to the Administrative Office of the U.S. Courts. It says 467,333 bankruptcies were filed, setting a new quarterly record.
New case filings in Buffalo have set records for each month from February through August in 2005, according to data from U.S. Bankruptcy Court. There have been 7,555 personal and business filings through August this year, 934 more than at the same point in 2003, which had been a record-setting year.
The spike in filings is directly tied to the change in bankruptcy laws, said U.S. Bankruptcy Court Judge Carl L. Bucki.
"Certainly there's a correlation," Bucki said. "Would we have had an increase without the change in the law? I just don't know. I'm hearing from attorneys that come in that they're preparing for an enormous amount of new cases between now and October."
"A lot of people are filing now because of the law change," said Freedman, who estimated that bankruptcy consultations at his firm are up about 40 percent this summer. "We're getting a lot more people coming in for appointments. People are nervous and worried."
Some of that concern is unfounded, because only a small percentage of people will be directly affected by the modified law's means test, said Laura Fisher, spokeswoman for the American Bankers Association.
"There is a good bit of misinformation out there," Fisher said. "There are people who don't understand the basic tenets of the bill. Statistically, 80 percent of [people filing for bankruptcy] make less than their state's median income."
But even those who are not affected by the means test will have to absorb the higher cost of filing for bankruptcy after Oct. 17, when Chapter 7 court fees will increase to $274 from $209.
The higher costs and additional paperwork mandated by the law changes are prompting more people to file, said John D. Penn, president of the American Bankruptcy Institute.
"There are people who are filing now who will not be affected by the means test but would be affected by the higher cost [of filing for bankruptcy]," Penn said. "There's a lot more paperwork that's required, and that means lawyers will charge more because they are being called on to do more. Most of the people are going to be able to get the same relief, but everybody is going to have to pay more."
Paul S. Walier, a Lackawanna lawyer, said that many of his clients are not affected by the means test but still want to file before the changes go into effect and bankruptcy law enters uncharted territory.
Lost amid the clamor of people filing for bankruptcy is the fact that most people will not be forced into Chapter 13, said Freedman, whose firm will not accept any new bankruptcy cases between now and Oct. 17 in order to file all open cases by the deadline.
Most debtors still will be able to file under Chapter 7, but filing after Oct. 17 could lead to unforeseen headaches, Freedman said.
"There are a lot of people who are really panicked," Freedman said. "All things being equal, it is better for the majority of people to file now, although it's not going to be the end of the world if they file later."