Bankruptcies to rise?

The number of Utahns filing for bankruptcy continued to fall during this year's first quarter.

But that trend could change in the coming months as a sweeping reform in national bankruptcy law nears passage.

For the first three months of 2005, Utah filings fell to 4,861, down 5 percent from 5,112 filings in the first quarter of 2004, according to the U.S. Bankruptcy Court for the District of Utah.

Yet Kevin Anderson, standing Chapter 13 trustee in Salt Lake City, said under new bankruptcy legislation — expected to pass the U.S. House of Representatives next week — a spike in Utah filings is likely.

"We saw that happen three or four years ago when we thought the reform act was on the cusp of passage," Anderson said. "I noted at that time that a number of attorneys were subtly using the threat of the new bankruptcy bill as a sales pitch — file now while you can."

In March, the U.S. Senate passed the bill. President Bush supports the new legislation, which could go into effect as early as October.

According to Anderson, the new law would make it harder for consumers to discharge their debts.

Under Chapter 7, a debtor under the new law would have to comply with a so-called "means" test, where debtors who earn more income than the state's median wage could be pushed into a Chapter 13 filing.

"It will require more and give you less debt relief," Anderson said. "It use to be you were discharged of just about anything in a Chapter 13. Now fewer debts will be discharged."

Under a Chapter 13 filing, which currently allows debtors to repay their debts over a three- to five-year period, the new law would increase that period to five to seven years.

For those who cannot pay, Anderson said, the new reforms will simply leave consumers at the mercy of creditors.

Joel T. Marker, Chapter 7 trustee for the District of Utah, said consumers would be ill-advised to enter bankruptcy now simply over perceived uncertainties of the new legislation.

"Anybody right now who says, 'I am just going to jump in because I fear what the new law is going to do,' they are doing themselves a disservice," he said.

Still, Marker said he believes the new law could hurt some consumers.