By Ryn Gargulinski: CNJ staff writer
If anyone is gonna go for broke, they’re gonna do it now. At least that’s what U.S. Bankruptcy Court clerk for New Mexico Norman Meyer predicts will happen in droves from now until Oct. 17 when a new bankruptcy law goes into effect.
Officially called the Bankruptcy Abuse Prevention and Consumer Protection Act, this long-awaited reformation will make it harder for people to file for Chapter 7, or bankruptcy in which no debts have to be repaid, Meyer said.
Instead, he said, there will be an increase in Chapter 13 bankruptcy, which is more like a long-term repayment plan. Those who file will also be required to attend and furnish proof of financial counseling.
“This is going to make a difficult process even more difficult,” Meyer said, pointing out New Mexico was a “heavy Chapter 7 state” with 9,500 bankruptcies declared in 2004, 80 percent of them Chapter 7.
Curry County amassed 206 bankruptcies last year, only 10 of them Chapter 13.
“The new law will end up costing the court more, make an additional work load for clerks, increase the number of trials, and lengthen the entire trial process,” Meyer said.
His office workers are gearing up to handle the 500-600 cases they predict to flow through their doors between now and the October deadline.
On the other hand, Brenda O’Shea, branch manager of Clovis’ Consumer Credit Counseling Service (CCCS), a non-profit agency that provides counseling for bankruptcy and other issues, doesn’t expect a deluge of clients. Less than one-third of CCCS clients end up going the bankruptcy route after learning more about their situation. She said the job of CCCS is to help educate the client.
“We are very excited about the new law,” O’Shea said. “We see this as an opportunity for financial education. Maybe there is someone who thought that declaring bankruptcy was their only choice. We can guide them to options they may not have known about.”
She said options include increasing their income, making note of and amending their spending habits, and consolidating their payments.
Another bankruptcy change not part of the new law but relevant to Clovis and its surrounding agricultural communities is Chapter 12. This is the chapter specifically for farmers and will become permanent effective July 1, rather than carrying its customary sunset provision. The definition of who qualifies as a “farmer” was also broadened, said Meyer, noting that even someone with a trout farm would now be eligible.
According to a release from U.S. Sen. Pete Domenici’s office, bankruptcy filings from 1983 to 2003 have increased 500 percent. Congress has been deliberating on a bankruptcy reform act for eight years.
Last year Curry County’s per capita bankruptcy rate was 4.6, ranking 13th out of 33 New Mexico counties. With its 9,500 bankruptcies in the entire state, New Mexico ranked “somewhere in the middle” nationwide, Meyer said.
Five highest bankruptcy filing totals by county in New Mexico for 2004:
• Bernalillo — 3,371
• Dona Ana — 883
• Sandoval — 647
• Santa Fe — 519
• Valencia — 447
Five lowest bankruptcy filing totals by county in New Mexico for 2004:
• Harding — 0
• De Baca — 7
• Union — 8
• Catron — 11
• Mora — 14