By MATT CHANDLER
Buffalo Law Journal

A law that was intended to reduce bankruptcy filings by eliminating fraudulent claims appears to be producing mixed results.

Nearly five years after President George W. Bush signed the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) into law, filings both nationwide and across New York state are on the rise. They are on pace to return to pre-BAPCPA levels in the next few years.

In 2004, the year prior to the implementation of the legislative reforms that added a series of checks and balances to the bankruptcy laws, there were nearly 1.6 million non-business bankruptcy filings in the U.S. In anticipation of the law going into effect in the fourth quarter of 2005, filings rose dramatically, to 2 million in 2005. Those numbers saw a sharp decline in 2006, with just under 600,000 non-business filings reported. Since then, filings have increased each year, returning to the 1 million mark just three years after the new rules took effect.

Courtney Quinn is a bankruptcy attorney with Jeffrey Freedman Attorneys and she says despite that initial plunge in the numbers, BAPCPA has not had a long-term impact on business at her office.

"In application, four and a half years later, the number of people filing bankruptcy is back to where it was," she said.

Quinn said the initial drop in filings was attributable to attorneys learning the new procedures combined with consumers being unsure of their eligibility to file based on media accounts of the legislative changes. With both of those hurdles overcome, she expects the workload at her firm to continue to increase.

While the numbers across New York state have mirrored those nationally-spiking in 2005, dropping in 2006 and increasing each year since - the news is significantly better in Western New York where bankruptcy filings have risen at a markedly slower rate. After a 2004 peak of 14,753 filings, six years later non-business filings have yet to crack 10,000 per year in the eight counties of Western New York. Cheektowaga attorney Barry Sternberg, who said he tracks the data coming out of Erie County very closely, subscribes to the theory that Buffalo never had the economic boom, thus avoiding the bust that leads to so many filings.

"Here, they (the numbers) have sort of stayed even," he said. "Last year, filings were up about 7.5 percent in Buffalo, but actually, the filings across the country have gone up more, primarily because of the foreclosure crisis. There were a lot more Chapter 13 cases being filed to save houses, but we really haven't seen that here in Buffalo."

Sternberg said filings in Buffalo were down 9 percent in the first two months of 2010, a possible indicator of some level of economic recovery. He also attributed the change to a tightening of the proverbial belt in the lending market.

"I've been predicting that the filings are going to start going down here in Buffalo and around the country," he said. "Banks and other lenders are restricting their lending practices. Cutting back on people's credit card lines and cutting out riskier borrowers will translate into fewer filings."