Bankruptcy Filings are Down – Why does that matter to you? Part 1

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Hi Folks,
Brian here. So, as of the time of this writing, we are in the middle of the Covid-19 pandemic. As an odd by-product of these intense circumstances, Bankruptcy filings nationwide are way down. That might seem counter-intuitive, but keep in mind that even though ordinary people are unemployed, so are debt collectors, repo-drivers, process servers, and all the other people that generally work in the debt collection industry. These are the people that cause you financial stress and motivate you to call a Bankruptcy attorney. In addition, many states have enacted moratoriums on evictions, lawsuits, and garnishments, so many people are not feeling the financial pinch as much as they would be under normal circumstances.
In over twenty years of practice as a Bankruptcy attorney, I have never seen Bankruptcy filings so low. If you are thinking about filing for Bankruptcy, this situation may have some unforeseen consequences on the administration of your case.
The most obvious thing that you will see is the lack of “in person” court appearances. Most courts have adapted to some sort of telephonic court appearance system, and frankly that has been a positive thing. Notwithstanding some small technical glitches, most people have adapted to the new system quite well, and not having to drive (and park) in downtown to be at the courthouse has been wonderful.
But the low Bankruptcy filings have caused some problems. Most people tend to think of the court system in high brow terms, and while it is true that there are many formal and noble aspects of the legal profession, we cannot forget that it (like everything else) is also an industry that requires money to operate.
Under most circumstances, there is enough court “business” flowing to pay for itself through “court filing fees”. When you pay your court filing fee in State Court or in Bankruptcy Court, that money is used to pay for all sorts of things that take place behind the scenes. When court business is down, and the court filing fees are not being generated, there is a direct effect on the people behind the scenes.
In Bankruptcy Court, the first place you will see the change is in the Clerk’s office. When I first started learning about Bankruptcy while in law school, I spent a summer working in the Bankruptcy Court and I spent a lot of time helping out in the clerk’s office. It was a bustling place, with rows and rows of physical files. It was always busy, with long lines and lots of clerk staff. In recent times, with the advent of technology, most Bankruptcy clerk’s offices are staffed with only a handful of people. Today, with Covid-19, we simply can’t expect the same level of service that we have come to expect. Many people are working from home. If you are filing Bankruptcy without an attorney, the Bankruptcy clerk’s office is your most important resource so you should plan on having delays in your ability to get accurate information about your case and its filing deadlines.
With most court appearances being telephonic, this has also led to a drastic cut in the general availability to court staff. For example, under normal circumstances a typical Judge would have between 2 to 5 staff members directly related to helping with their case load. You could easily call and get someone on the phone to answer a quick question. Today, most judicial staff are working from home, and while they do their best to return phone messages, there is a delay in getting information about your case. If you are filing without an attorney, in the past, you used to be able to go to a court motion early and speak to the support staff to get some direction on things the Judge may be concerned about with your motion. With telephonic hearings, your first interaction will be with the Judge when your case is called and he or she may have specific questions for you that you were not prepared for.
As we all make adjustments to our lives related to the Covid-19 pandemic, we have to also make additional allowances for less availability of court resources, which can really cause problems for your case if you are trying to navigate something that you are not familiar with. In my next post, I’ll talk about the ways that the decline in Bankruptcy filings is affecting your interaction with the Bankruptcy Trustees.

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