Bankruptcy filings soared in the first half of this month as Nevadans raced to beat changes in the law that took place yesterday. The changes make filing more complicated.
In the first 16 days of October, 8,586 people sought bankruptcy protection, a huge 1,300 percent increase over the same period a year ago that saw 615 filings.
Most of the filings and the increases, were in southern Nevada. A new bankruptcy judge will be added to the federal court system to accommodate the burgeoning filings.
Reno area bankruptcy lawyers aren't surprised by the surge of activity.
“The law has changed the rules in the middle of game. It's unconscionable," John A. White Jr. of Reno told the Reno Gazette-Journal.
He and other opponents have argued the new law removes a critical safety net for those who have lost their jobs or face unexpected medical expenses. They contend the changes will be especially hard on low-income working people, single mothers, minorities and the elderly.
Supporters counter that reform was necessary to prevent people from overspending on their credit, then ducking their responsibilities.
Some bankruptcy lawyers and legal experts in Nevada agree there have been abuses. However, they said the remedy approved by Congress, a complex 504-page law, and signed by the president, is too drastic.
“It's a draconian shift" that will hurt debtors and those in the legal community trying to help them, said Reno lawyer Geoff Giles. Lawyers said the new law severely erodes the "fresh start" concept.
This has been used in the past as a way to help debt-ridden people turn over assets and start over, or to go on a strict repayment schedule. Critics of the new law argue more people will be hard-pressed to meet requirements on spending while trying to pay off their debts.
In addition, lawyers face extensive new requirements. Several in the Reno area said they don't intend to do consumer bankruptcies anymore. Under the new law, legal experts said lawyers will be required to investigate a debtors claims and will be financially responsible for court costs and creditor's legal fees if a debtors statements about property and finances are false or incomplete.