TRUSTEES PRESS SEARCH FOR BANKRUPTCY ABUSE

January 19, 2004

Return To Archives

As bankruptcy caseloads grow across the nation, courts are wringing more cash from debtors who once might have escaped paying their debts.

Court-appointed trustees who oversee cases are scouring bankruptcy petitions for signs that debtors can pay off more of their obligations, said Jane Limprecht, a spokeswoman for the U.S. Trustee Program.

The increased scrutiny began in 2001, which happened to coincide with a big jump in bankruptcy filings nationally.

The heightened vigilance that marks the new enforcement effort is complicating the lives of some who have filed for personal bankruptcy.

In the six months ended March 2003, bankruptcy court trustees nationally took 13,125 actions aimed at helping creditors reclaim more money. Those actions ranged from telephone calls to a debtor’s attorney to formal “substantial abuse motions,” Limprecht said. Bankruptcy trustees are pushing more people who file for Chapter 7 protection into restrictive Chapter 13 filings.

In the year ended October 2002, trustees took only 5,707 informal and formal actions, Limprecht said. Of that number, 1,400 cases either exposed the debtor or allowed voluntary conversion.

Credit-card companies and banks have long sought federal legislation that would force more people into Chapter 13. But the industry has so far failed to win the support needed for passage.

Some commentators believe the increasing number of conversions to Chapter 13 is the result of pressure from supporters of the bill.