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1.1 million debtors file for relief in 2004

1.1 million debtors file for relief in 2004

BRIDGEPORT, Conn. - As the U.S. Senate takes up another bill designed to change the nation's bankruptcy laws, a report said that more than 1.1 million debtors filed to relieve the burden of debt in America in 2004 - the fourth year in a row the total broke 1 million.

The Senate on Monday continued to debate S.256, a bill that would create a more difficult test for those seeking to discharge their debts. A vote on the bill is expected this week.

This is the eighth year that Congress has debated reform. But opponents of the legislation say they believe the bill will become law this year because Democrats, who have killed it in the past, are too weak to squash it.

A local bankruptcy attorney and a national organization that tracks bankruptcy trends said Monday that the reform wouldn't change the situations -including high consumer debt, high medical costs and job loss - that have caused bankruptcy to flourish in Connecticut and the nation.

The Administrative Office of the U.S. Courts reported last week that there were 1.59 million bankruptcies filed in 2004, down 3.8 percent compared with the 1.66 million filed in 2003. The report said the total for 2004 was second only to the 2003 total.

As with the nation, Connecticut saw a slight decline in bankruptcies, as people filed 11,423 cases in 2004, compared with 12,246 filed in 2003.

There are four bankruptcy chapters, but the three major ones are 7, 11 and 13.

Chapter 7, which is also called liquidation bankruptcy, allows a debtor to erase his debt by selling off assets and splitting the proceeds among creditors. In cases where a debtor has no assets, the debt is erased.

Chapters 11 and 13 allow debtors to reorganize finances and create a plan to repay those debts over time. Chapter 11 is generally for businesses and Chapter 13 is for individuals.

The report said that 9,382 Connecticut residents filed Chapter 7 cases and 1.13 million Americans filed for the protection in 2004.

The number of Americans filing Chapter 7 has been higher than 1 million in each of the past four years.

There were 84 Chapter 11 cases filed in Connecticut in 2004 and 10,132 filed in the nation. There were 1,957 Chapter 13 filings in the state and 449,129 in the nation, according to the report.

Richard Zeisler, senior partner with the Bridgeport-based law firm of Zeisler and Zeisler, said the reason people file for bankruptcy protection in Connecticut is no different than elsewhere in the country. He said people file because they were hit with an unexpected drop in income, because of a job loss or divorce or because they are facing a huge medical bill.

He said the bill the Senate is taking up -and will probably pass -is mean-spirited and will harm people of modest means.

"It's going to require repayment Ãof debtsÄ by people who should be working to get their lives back in order," he said.

An analysis of the bill by the Congressional Budget Office said it would probably force more debtors out of Chapter 7 and into Chapter 13.

Samuel Gerdano, executive director of the American Bankruptcy Institute, said his group has no position on the bill.

He said the bill doesn't attack the real problem facing America: that people are carrying too much debt and that one big unexpected expense can push a person into insolvency. Gerdano said the large number of bankruptcies is a symptom of a national problem and that altering the relief requirements wouldn't change this.

- Gazette news services

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