By Kathryn Skelton,Staff Writer

LEWISTON – Neil Shankman started turning away clients Tuesday.

There’s no more room in his bankruptcy book.

The Lewiston lawyer began running ads three months ago, warning people that law changes on Oct. 17 will make it harder to dump their bad debt by going bankrupt. For a small group, it will be nearly impossible.

“I was hoping people would respond quicker,” said Shankman, who has been overwhelmed with requests over the last few weeks. “I was here last night until 12:15.”

In Maine, personal bankruptcy filings are up 26 percent for the year so far, and the last-minute rush to file has been intense. Locally, at least 45 people have declared bankruptcy since Oct. 1.

Last year, in the first seven days of October, just three people did.

Recent filers include:

• a single man with virtually no income and $21,000 in debt;

• an elderly woman living on $650 a month trying to get out from under a credit card charging 44 percent interest;

• a married couple with two businesses and 43 creditors owed $100,000-plus.

“There’s an explosion of calls,” said lawyer Chris L’Hommedieu, who has a practice on Pine Street. He had averaged 10 to 14 bankruptcy cases a month. He’s doing that many now a week. “It’s simply reality that most families are living hand to mouth.”

September saw three times as many filings as normal, according to Celia Strickler, clerk of the courts at the U.S. Bankruptcy Court for Maine.

“We’ve been referring to it as the python that ate the elephant – this huge bulge,” she said.

Why the rush? So many things will change in one week.

More fees, more paperwork

Ten years in the making, a bankruptcy reform package signed by President Bush in April will shift some people away from Chapter 7 – the ability to walk away from most old debt – toward Chapter 13 – the obligation to pay back at least a little over three to five years.

Among the changes:

• Filing fees will increase from $209 to $274. And the cost of an average bankruptcy case will almost double to $1,500.

• New requirements to track down more income and asset records will take hold.

“You’re not going to be able to help someone if they’re disorganized,” said Oksana Bennett at the Bennett Law Office. “For the scatter-brained debtor, it’s going to be a nightmare.”

• New financial counseling requirements before and after filing will be mandated.

• In deciding how bankrupt is bankrupt, courts will no longer focus on how much money people have left over at the end of the month. They’ll look at earnings relative to everyone else. Most households with incomes above the median (in Maine, $35,000 for one person, $64,000 for a family of four) won’t be able to file for Chapter 7. That’s expected to affect 10 to 15 percent of would-be filers, Shankman said.

• Attorneys will have to vouch for clients’ assets, or lack of assets, and can be held liable in the future by a creditor if that information is wrong.

• There will be new restrictions on the advice attorneys can offer.

“People who’re calling are pretty knowledgeable there are changes going on and they’re not going to be good,” said South Paris lawyer Jeff White. His monthly business is up almost 20 percent.

Chapter 7 filings generally stay on a person’s credit report for seven to 10 years, White said. Chapter 13 stays on the same amount of time, but that clock doesn’t start ticking until the agreed-upon debt is paid back, so it takes longer to achieve a financial fresh start.

Three of Maine’s four congressional delegates supported the bankruptcy reform with U.S. Rep. Tom Allen the lone dissenter.

U.S. Sen. Olympia Snowe had called it “commonsense.” U.S. Sen. Susan Collins said this week that Americans pay higher prices and higher interests rates now “as a result of people who file for bankruptcy despite having the financial means to repay all or a portion of their debts. The Bankruptcy Reform bill will stop these individuals from using bankruptcy as a financial planning tool.”

‘Lots of grief’

Shankman, state chair of the National Association of Consumer Bankruptcy Attorneys, said three things usually lead people to bankruptcy: a lay-off/unemployment, medical bills and divorce. People lean on credit cards in those situations, anticipating it’ll only be a short-term fix, and suddenly it isn’t.

Bennett had a client several years ago who got $377 in Social Security a month and owed $20,000 on credit cards.

“The credit card industry is out of control. They’re reprehensible,” she said. “Why would you give people all this access to credit without checking their income?”

In part from criticism like that, under this reform, credit cards will have to prominently state both when introductory rates will end, how high they’ll go and how long it’ll take to pay off a debt making minimum payments.

“If you live on teaser rates, too much of a good thing is a bad thing,” said Steve Bartlett, president of The Financial Services Roundtable, a trade group of 100 businesses, including MBNA. The credit card giant, which has hundreds of employees in Maine, directed questions to him.

Bartlett said the changes will eventually lead to fewer bankruptcies and hold people more accountable if they have the means to pay back some of the debt.

“Bankruptcy is a bad thing. Sometimes it’s understandable, (but) it’s still a bad thing,” he said.

While lawyers put some blame on easy access to credit, Bartlett blamed lawyers for fueling the current rush to file for bankruptcy. People who would have otherwise kept trying to pay are giving in to their message, Bartlett said. “The number of filings is up (but) it’s not as if the economy is somehow involved. It’s just because of the ads saying, ‘You should file now.'”

Maine saw a slight uptick in filings immediately after the law changes were approved by Congress this spring. Summer months were slow until August, which saw the most bankruptcy filings in one month ever, Strickler said.

Through the end of September, 4,243 people had filed for bankruptcy here, according to Lundquist Consulting Inc. That’s up 879 from the same period last year.

State Economist Galen Rose said it’s discouraging to see figures that high, but those bankruptcies won’t affect any statewide economic measures.

“There are far too many people, I think, living payday to payday. Too little planning,” he said. Schools could do more to prepare people. “They almost never go into simple finances in high school, when it’s something almost everyone has to deal with. There’s a lot of grief to be had if one doesn’t learn.”

The court in Maine will stay open online until midnight Oct. 16 for those electronic filers determined to avoid the impending changes. After that, a new era begins.

“After Oct. 17, there will still be a bankruptcy code,” said Shankman, who drew the line this week at 25 cases in the works and 28 more appointments. “It’s not the end of the world. It will be more expensive, it will be more complicated, but it’s not the end of the world.”