More Debtors Seeking Protection in Bankruptcy
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THE word bankruptcy comes from banca rotta, or broken bench, a term used in 14th century Italy where merchants conducted their business seated on benches. When a merchant failed to meet his financial obligations, the other merchants broke his bench over his head. There are a lot of broken benches around today. Bankruptcy filings at the United States Bankruptcy Court in White Plains, which serves Westchester and Rockland Counties, increased to a record 1,364 last year, up from 978 in 1989. If January, when an additional 146 filings were recorded, is a portent, this year could also set a record. “Filings are being made right across the board,” said Kenneth Freda, deputy clerk of the Bankruptcy Court. “They range from small businesses to large businesses and to consumers, including professional couples, who are all seeking protection. We have six people in this office and we could use 10 to handle the increased traffic.” Locally, Individuals Predominate Bankruptcy filings in the court include those under Chapter VII, which covers businesses that want to liquidate; Chapter XI, which allows businesses to keep operating; Chapter XII, for farmers, and Chapter XIII, for individual debtors. In the White Plains court, the majority of bankruptcy filings come under Chapter XIII, said Eric Charles Kurtzman, a lawyer who specializes in bankruptcy law. “Many cases in this court involve young families who are struggling to get out from under a mountain of debt, brought about by using too many credit cards,” he said. Mr. Kurtzman said the latest bankruptcies frequently involved people who were very well off until recently. “For example, one professional couple living in northern Westchester recently filed for bankruptcy even though the husband, who is a lawyer, earns $120,000 a year,” Mr. Kurtzman said. “But their problem was that the wife, who also earned a high salary, lost her job and then they started falling further and further behind making payments on the $350,000 debt they had run up on six credit cards.” He added that bankruptcy petitions were now filed by people from all walks of life: from 22-year-olds unable to pay car loans to elderly citizens burdened with high medical bills. Mr. Kurtzman, who is 37, is a partner and founder of the law firm of Kurtzman & Haspel. It is one of the few full-service law firms in the local area that has its own department specializing in bankruptcy law and creditors’ rights. “Bankruptcy law was a relatively obscure specialty when I began my law career nine years ago, as a clerk for U.S. Bankruptcy Court Judge Roy Babit,” he said. “Then only a few of the largest firms had bankruptcy departments. But I’ve always been interested in the power of bankruptcy law and the restructuring of debt.” Now the economic downturn has created a boom for bankruptcy lawyers. Mr. Kurtzman’s firm, headquartered in Nanuet, has an office in Manhattan and recently opened a third one in Ramsey, N.J. “Changes in the bankruptcy law in 1979 have made it easier to file for protection,” Mr. Kurtzman said. “It doesn’t have the stigma it once had. I’m a court-appointed bankruptcy trustee for the Southern District of New York and as such I administer 60 to 80 cases a month and I see everything. ‘Most People Are Honest’ “Most people, I’ve found — at least 98 percent — are honest. They file for bankruptcy because they are pushed to the limit. Divorce and matrimonial problems are the root of a lot of trouble, but credit card debt is what sends most people over the edge.” April is the cruelest month for debtors, Mr. Kurtzman said, because of the demands for payments of bills acquired during holiday buying sprees. “Credit card companies start demanding payment in earnest and our phones start jumping off the hook with people wanting to know how they can stop collection agencies from hounding them,” he said. “I still recommend that they try to contact the financial institution that issued the credit card, to try to reach a settlement on the debt. But unfortunately the credit card companies will usually refuse. They find it cheaper to give the case to a collection agency.” Some Debts Still Must Be Paid More : query.nytimes.com |