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Jodi Pingle, left, and daughter Shannon pack as daughter Jennifer reads an eviction notice left on their apartment door in Farmington Hills. The Pingles, who filed for bankruptcy in November, won't be affected by proposed tougher rules.Get-tough bankruptcy bill may spur flurry of filings
Metro area lawyers already see jump in calls over proposal to crack down on debt.
Richard Pingle watches his family pack. Wife Jodi was one of 63,700 state residents to file for shelter from creditors in 2004.The bankruptcy bill would:
• Set up a test for measuring a debtor's ability to repay. People with insufficient assets or income could still file a Chapter 7 bankruptcy, where debts are wiped out after assets are forfeited.
• Debtors with income above the state's median income -- $27,930 for individuals in Michigan - who can pay at least $100 a month over five years would be forced into Chapter 13, where a judge sets up a repayment plan. • Require people filing to pay for credit counseling.
• Give top priority to a spouse's claims for child support.
-- Associated Press
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Metro Detroit bankruptcy lawyers say they're getting a flurry of calls from people worried about tougher new bankruptcy laws barreling through Congress.
The changes, passed Thursday by the U.S. Senate, will prompt a surge in personal bankruptcy filings in Michigan, which hit record numbers last year, lawyers say.
"We've gotten 50 phone calls today, instead of the usual 15, and three times as many people walked through our door," said Walter Metzen, a Detroit bankruptcy lawyer.
Lawyers say debtors want to beat the bankruptcy law changes that will make it more expensive and tougher for consumers to get out of paying their bills.
The Senate approved the first major overhaul of bankruptcy laws in 27 years. The House will now consider a similar bill.
Jodi Pingle, 34, of Farmington Hills is grateful she won't fall under the new rules. She filed for Chapter 7 in November. She and her husband, a former General Motors Corp. engineer, have struggled to find steady work for months. Their income fell from $100,000 a year to $1,400 a month, which is what Pingle receives from unemployment.
The Pingles are being evicted from their Farmington Hills home on Monday. Two of their three children may have to go live with relatives.
"I am grateful we won't have to be scrutinized as others soon will. Everyone has told us the new laws will mean more costs to prove you are bankrupt," Jodi Pingle said. "We could barely scrape together the $500 it took to file for the petition now."
The Pingles aren't alone.
A record 63,700 Michigan residents filed for protection from creditors last year.
According to state bankruptcy court records, that's up 38 percent from three years ago. The majority are filed in the state's Eastern District, which includes Metro Detroit. About 130 people file for bankruptcy protection in Eastern District every month, said Stuart Gold, one of the bankruptcy trustees. Trustees act as administrators for bankruptcy filings.
"We are anticipating a rush of filings," Gold said.
If the House approves the new rules as expected, President Bush has said he will sign them into law. It would take effect 60 days later.
If passed, it will bring the end to an eight-year battle over bankruptcy laws, but it won't quell the controversy.
"Almost all trustees and all bankruptcy law professors think this is a bad bill," said Laura Bartell, an associate professor of law at Wayne State University, who teaches bankruptcy law.
"Credit card companies and banks really like this bill, and they have a lot more money to persuade Congress than the rest of us. So the law is going to be changed," Bartell said. "But the solution is like swatting a fly with a sledgehammer."
Sponsors of the legislation say it will lower the costs of goods and services for all consumers by making it easier for companies and issuers of credit to collect unpaid debt.
"The bankruptcy system is broken and it needs to be fixed," said Laura Fisher, spokeswoman for the American Bankers Association. "There are higher income people who walk away from paying $3 billion to $4 billion a year in debt, and that is debt they can pay. Bankruptcy protection is going to be there for people who need it."
"Bankruptcy protection is going to be there for people who need it," Fisher said.
You can reach Louis Aguilar at (313) 222-2760 or laguilar@detnews.com.
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