ATLANTA - Experts are warning that a tougher bankruptcy bill pending in Congress could increase the number of foreclosures in Georgia, the state that leads the country in Chapter 13 filings.
President Bush has promised to sign the bill, which is subject to negotiations among members of a House-Senate conference committee. When it takes effect six months after Mr. Bush signs it, the measure will require people wanting to file for bankruptcy protection to show proof of attending a five-day money-management course.
"People won't be able to wake up a day before the foreclosure and file," said federal Bankruptcy Judge Joyce Bihary. "That's going to put an enormous challenge, and opportunity, on those organizations offering counseling."
One of the largest advisory organizations, the Consumer Credit Counseling Service, already has seen a 23 percent boost in the number of people seeking voluntary assistance during the first two months of this year. Rising energy costs and reduced overtime wages triggered the increase, said Suzanne Boas, president of the Atlanta CCC.
Georgia has so many more personal bankruptcies, experts say, because its foreclosure procedures are more streamlined, requiring only four weekly legal ads before the affected property is auctioned off on a courthouse steps. Other states require a hearing before a judge or impose consumer protections found in their landlord-tenant laws.
"If you look around the country, it's a lot harder to lose your house in other states," Judge Bihary said. "I think you will see a lot of hardship (under the new rules)."
Most Georgians who file for bankruptcy protection do so to prevent their mortgage lender from repossessing their homes rather than because they are overwhelmed by credit card debt, said M. Regina Thomas, a court-appointed trustee. Ironically, Georgia personal bankruptcy cases involve the lowest number of credit cards per filer of any state.
"I think that really slays a misconception," she said. "Credit cards are not what put most of our cases into bankruptcy."
Unexpected medical costs and job loss often keep people from staying current on their mortgage payments, said Ms. Thomas, the trustee with the largest number of Chapter 13 cases in the nation, overseeing $85 million in disbursements last year.
Ms. Thomas agrees with the counseling provisions of the pending bankruptcy act. The bill would require people to undergo additional training before they could be freed from bankruptcy status.
Ms. Boas said most lenders are willing to restructure payment plans for borrowers who request them when money problems first surface.
"They haven't gotten into their problem overnight," she said. "Creditors are very willing to help them at the early stages (of financial struggles). But when they ignore them and ignore them ... and then get religion at the last minute, then they aren't as inclined to offer repayment plans."
Top five states ranked by order of 2000 Chapter 13 filings
Source: U.S. Bankruptcy Court
Bankruptcy chapter and verse
Chapter 7 results in the sale of all assets to convey the proceeds to creditors for repayment.
Chapter 11 allows businesses to reorganize to streamline costs while developing a repayment plan.
Chapter 13 gives debtors protection from involuntary foreclosure while they repay part or all of what they owe their creditors.
Reach Walter C. Jones at (404) 589-8424.