On this, the last day to file bankruptcy under the old code, we are in the midst of an honest-to-goodness Bank Run. In Los Angeles and in bankruptcy courts across the country, there are lines at the filing window that snake out into the street and beyond. Normally, there might be one or two people in line. The electronic filing system that my office (and most professionals) use is overloaded; just to enter data is a time-consuming process. A bankruptcy trustee informed me yesterday that ten thousand people filed last Friday, just in the Central District of California. Probably half the clients I'm getting are people who would normally have had no intention of filing, and even the thought of so doing wouldn't have crossed their minds.

What this will do to the economy I shudder to think about....

It only took four months, but the New York Times has also come to the conclusion that a robust housing market has an inverse correlation to the rate of bankruptcies in a state. Barry L. Ritholtz also notes the intriguing connection between high bankruptcy rates and Republican voting, something that can be seen when one looks at a county-by-county map of the rate of increase/decrease in bankruptcy filings since 2000, and the county-by-county electoral maps from 2000 and 2004. An apples-and-oranges comparison, of course, since one map reflects a four-year trend, while the others are snapshots that don't quite give a sense of how strong the inclination is in some states to file bankruptcy (Utah, for example, has hardly budged since 2000 in the number of bankruptcy filings, but has consistently been at or near the top in terms of the percentage of filers), but interesting nonetheless.

YBK [Part 25]: Remember back in March, when we set a monthly record for the number of bankruptcies filed. On average, there were just under 7,200 filings per day back then, which was the same month that the Bankruptcy Reform bill passed Congress.

In the week ending October 7, 2005, there were more than 20,000 bankruptcy filings per day in the United States.

Los Angeles [A] 5, New York [A] 3: Not quite the finish I was expecting. Ervin Santana was the hero filling in for the injured Bartolo Colon, but his initial inning was shaky enough: back-to-back-to-back walks, followed by a single by the nine hitter and a sac fly. But the Angels took back control of the game in their half of the second, thanks to GAnderson and Kennedy, and blooped Messina to death in the third. Thereafter, Santana took control of the game, the Angels dominated the tail end of the Yankees' lineup, and A-Rod and Matsui couldn't hit in the clutch to save their grannys' lives. After Jeter's home run in the seventh, I began having flashbacks to 1986, and with the Yankees getting three singles in the Ninth, my queasiness about the stopper abilities of K-Rod seemed justified. But stellar defense got the job done, again, and it's on to the North Side.

Now comes the hard part. Who's gonna start after Game 1?

Considering what a Heads fan I used to be, I'm surprised I didn't know he has a blog....

YBK [Part 24]: CNN is reporting that the week ending October 1 saw a record 68,387 filings, up approximately 25% from the old record, which was set the previous week. It also notes what I predicted some time ago, that the new law will generate a billing bonanza for bankruptcy professionals.

Ironically, this last-second panic to file before the new law goes into effect a week from today may not be necessary. The U.S. Trustee, which administers the bankruptcy courts and has the responsibility, along with the court, of enforcing the means test under the new law, drafted a letter last week formally stating that it considers "...income loss, expense increase, and other adverse impacts of a natural disaster to constitute 'special circumstances' in determining whether to file an enforcement motion on grounds of presumed abuse." The Trustee also announced it would waive some of the paperwork and credit counseling requirements from affected debtors, as well as agree not to pursue venue objections against displaced debtors filing in other states.

Of course, this should alleviate some of the potential problems faced by survivors of Hurricane Katrina, who lost critical financial records that could have backed up any "special circumstances" claim before the courts, as well as destroying the legal infrastructure along the Gulf Coast. It may also ease pressure on Congress to revise the new law before it goes into effect October 17. Although creditors can still raise objections under the new law, it would become prohibitively expensive for them to do so; the advantage of the new law for them was supposed to be the fact that they could piggy-back on the Trustee's office's without having to fill out the paperwork in each and every instance. Now, of course, if they file a motion to convert, they will do so before a court that has already been put on notice that the U.S. Trustee is presumptively on the side of the debtor.

More interesting to me, though, is the fact that the Trustee, an instrument of the Department of Justice, is interpreting its discretionary power to act, or not to act, quite broadly. The new law does not make it mandatory for the Trustee to attempt to convert cases where the debtor's income exceeds the medium level for the state; it is a power the Trustee "may" exercise. The only thing the Trustee is obligated to do is notify the court at a certain point that it considers the case to be an abuse, and that it intends to seek the conversion of the case. That the Trustee has already decided to ignore congressional intent to not include financial losses resulting from natural disasters as a "special circumstance" indicates a reticence about bringing motions to convert cases to Chapter 13 in other situations as well. A broad definition of what constitutes "special circumstances" will mean that the new law may only create new paperwork for filers, not a dramatic shift in who will be permitted to receive bankruptcy relief.