By PORTSIA SMITH
A black wreath will adorn the locked doors of Boleman Law Firm on Monday.
The bankruptcy-law firm will close in mourning for an old bankruptcy law that dies Oct. 17--and to get a break from the past few hectic months, said attorney G. Russell Boleman III.
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 has kept his firm and other area bankruptcy attorneys running ragged since the law was signed by President George W. Bush in April.
Since then, thousands have rushed to file for bankruptcy before the new law goes into effect.
Boleman said his Richmond-based firm, the largest law firm in Virginia that specializes in bankruptcy cases, receives about 700 calls a day. Business has recently doubled because people are paranoid about the new law.
Boleman Law Firm had an office in Fredericksburg, but had to temporarily relocate it in Richmond, Boleman said. But they will return to the area soon, he said.
Bankruptcy attorneys Walter Ragland in Fredericksburg and Earl Oberbauer Jr. in Spotsylvania County were so busy they didn't have time to comment on how busy they've been.
The new bankruptcy law will make it harder and more expensive for consumers to file for Chapter 7 bankruptcy, which allows debtors to essentially wipe their slates clean.
The federal law says a person must participate in credit counseling within six months of filing for bankruptcy. That counseling could cost up to $50 for a 90-minute session.
It also mandates that many debtors complete a financial education course before their bankruptcy cases are finalized.
This law is likely to push more debtors into Chapter 13, which requires them to pay creditors within five years instead of the current limit of three years.
But according to Boleman, the new law shouldn't scare too many consumers in the Fredericksburg area.
"Fredericksburg has a better employment rate and people in the surrounding counties have better job opportunities," Boleman said. "I don't think Fredericksburg is being dramatically affected because there is a good work force and Fredericksburg has a good economy."
And the numbers prove it.
According to the United States Bankruptcy Court for the Eastern District of Virginia, Chapter 7 filings have increased, but not dramatically.
In June 2005, there were four Chapter 7 filings in Fredericksburg, 11 filings in Spotsylvania and 16 in Stafford. In September, the city had 16 filings, Spotsylvania had 35 and Stafford had 40.
Chapter 13 filings remain almost unchanged, according to court records.
From June to September, Fredericksburg's Chapter 13 filings stayed at four, Spotsylvania's went from 11 to 13 and Stafford's went down from two filings to zero.
Creditors lobbied to get Congress to pass the bill, which was designed to reduce the amount of people filing for Chapter 7 and abusing the system.
But banking consultant Bert Ely of Alexandria told The Associated Press that creditors might not get much more than they had before.
"A lot of folks just don't have the income to handle repayment plans, or they'll start out under a plan and a few years down the road, they'll get into some trouble and not be able to complete it as envisioned," he said.
In addition, he added, it could be a "win-lose" situation for creditors because higher administrative costs in dealing with long-term collection programs will eat into the money they recover.
And, because most Chapter 13 users will be put into five-year repayment plans instead of the three-year programs currently in use, it will take longer for lenders to see their money back.
Auto lenders may do better than credit card companies because of a change in the so-called cram-down or strip-down provision for how loans secured by autos, trucks or other personal property are repaid in Chapter 13 cases.
Under the old law, if a debtor's car was worth $6,000 and the outstanding loan was $10,000, the lender would be assured $6,000 in payment but would have to stand in line with other creditors to try to recover the $4,000 balance. Under the new law, the borrower in many cases will be required to repay the entire $10,000 if the vehicle was purchased within 30 months of the bankruptcy filing.
The credit counseling aspect of the law is aimed at educating people about their financial options when they are considering filing for bankruptcy.
Clearpoint Financial Solutions, which has an office in Fredericksburg, is awaiting approval from the Executive Office of the U.S. Trustees to serve as an approved credit counseling agency for bankruptcy filers.
Barry Coleman, project manager for the Richmond-based non-profit organization, said its role, if approved, would be to give a financial analysis, create a budget for the debtor and present viable options.
"Our role is not to steer them in one direction or the other, but to make sure the consumer understands they may have other options out there besides bankruptcy," he said.
Boleman said consumers should not be concerned with changes to the bankruptcy law as long as they can maintain control of their finances.
"This is a new law. It is going to be difficult, but not impossible," he said. "As long as people pay for their housing, cars, child support and taxes, they are fine."
To reach PORTSIA SMITH: