Bankruptcy Filers Rush to Avoid New Rules

Christi Antwine, unemployed and with almost $50,000 in credit card debt, joined hundreds of people lined up Thursday at U.S. Bankruptcy Court in downtown Los Angeles -- all part of the last-minute rush to file for Chapter 7 liquidation before new bankruptcy rules go into effect Monday.

Antwine, eyeing the line that snaked through the lobby and hallways of the federal building, said she had been meaning to file for the last few years but just hadn’t gotten around to doing it.

“Everyone knows you can’t live in California for nothing,” said Antwine, 37, clutching a manila envelope filled with documents detailing what she acknowledged was a dismal credit history.

The new laws will make it harder for individuals to enter into liquidation bankruptcies, in which they surrender their assets to creditors in exchange for wiping out their debts.

Although the new rules affect all bankruptcies, including business reorganizations, experts say the biggest effect will be felt by individuals, who will be required to go through credit counseling and provide additional details of their finances.

In Southern California, electronic bankruptcy filings will be accepted from bankruptcy lawyers through noon Saturday. For most people, however, today is the last day they can file under the old rules.

Lines have been forming at bankruptcy courts across the country all week. Retiree Tony Mirenda said there were already 50 people waiting ahead of him when he arrived Thursday at U.S. Bankruptcy Court in Santa Ana at 9 a.m. He finally got to the front of the line at 2:35 p.m.

“It’s kind of like the DMV, but even worse,” said the 68-year-old Rancho Santa Margarita man.

Mirenda said he had taken his pension savings in a lump sum when he retired in 1999 from Kaiser Permanente and invested in technology stocks.

The market’s collapse, combined with family emergencies and hip surgery, wiped out the retirement nest egg and left him and his wife getting by on $2,062 a month in Social Security, he said.

Owing more than $100,000 in back taxes and credit card debt, Mirenda said he believed that he had no choice but to file. “Right now I’m the original living turnip -- there’s no blood left to get out of me.”

In Santa Ana, more than 1,500 people have filed in the first two weeks of this month -- more than double the figure for all of October last year. Those waiting in Santa Ana complained that the court should have been prepared for the rush.

On Thursday afternoon, nearly 150 people slouched against walls, slumped in chairs and lay on the floor with the wait in line exceeding six hours for some.

“Shame on the government for not putting more people in here,” said Dale Dombrowski, who had been paid by an attorney to wait in line and file a Chapter 7 petition for a client.

The scene was similar in downtown Los Angeles, where a Bankruptcy Court official said filings this week were five times the normal level.

“We’re trying our best,” said Dennis Tibayan, who oversees operations in the downtown filing office, adding that hundreds were already lined up Thursday when courthouse doors opened at 9 a.m.

Most people waited in line to present their filings to clerks, ignoring pleas from a court official to simply deposit their paperwork in a drop box. That box was overflowing with documents.

“I’ve been doing this for 15 years, and it’s never like this,” said David Gomez, a courier who was delivering documents.

Matthew Schow, 28, said he decided to race down to the courthouse Thursday morning after hearing a radio news story discussing the tougher requirements.

Schow, who works in film production, said his $10,000 in credit card debt was mostly from an expensive rock climbing habit from his teenage years.

“I didn’t want to do this -- I’d rather pay it off. It’s why I put it off for so long -- I continually told myself I could do it,” he said.

Credit card companies hope that the new rules approved by Congress will force more debtors to pay off their bills, and make it harder for them to take the bankruptcy route.

“The new law is really directed toward a small but significant percentage of people who do have the means to pay back,” said Lynne Strang, a spokeswoman for the American Financial Services Assn., which has lauded the legislation that was signed into law in April by President Bush.

But those lined up to file Thursday said they weren’t out to take advantage, instead complaining with mantra-like repetition about the crush of high interest rates.

Roger Barnett, 62, standing behind a line of about 200 people in downtown L.A., said this was the second time he had to file for bankruptcy, and he was relieved to slip under the wire to clear out his $5,000 in credit card bills.

“This time, I’ve tried to keep up with my debts, but the interest just keeps building,” Barnett said.

*

(BEGIN TEXT OF INFOBOX)

Where to go

People who want to file bankruptcy papers under current rules can do so until 4 p.m. today at the following locations:

* 300 N. Los Angeles St., Los Angeles

* 3420 12th St., Riverside

* 411 W. 4th St., Santa Ana

* 1415 State St., Santa Barbara

* 21041 Burbank Blvd., Woodland Hills

Attorneys can file papers electronically till noon Saturday. The downtown L.A. court will accept emergency petitions by appointment only Sunday. Appointments must be made by

3 p.m. today by calling (213) 894-8401.

Source: Times research

Los Angeles Times