'Recession hasn't bottomed out on Main Street'

DuPage judge's bankruptcy caseload peaks, expected to grow

  • Glenn Stearns is the Chapter 13 trustee for the collar counties. He and his staff, including controller Carol Fox, handle bankruptcy cases where consumers are put on a payment plan to repay their debt.

      Glenn Stearns is the Chapter 13 trustee for the collar counties. He and his staff, including controller Carol Fox, handle bankruptcy cases where consumers are put on a payment plan to repay their debt. SUZANNE CARAKER | Staff Photographer

  • In his 11th year as the Chapter 13 bankruptcy trustee for the collar counties, Glenn Stearns' caseload has almost tripled since 1999.

      In his 11th year as the Chapter 13 bankruptcy trustee for the collar counties, Glenn Stearns' caseload has almost tripled since 1999. SUZANNE CARAKER | Staff Photographer

 
 
Updated 11/1/2010 10:28 AM

Lawyer after lawyer filed by U.S. Bankruptcy Judge John H. Squires in the DuPage County courtroom. They asked for continuances, filed resolutions or sought understanding for their clients.

Some of the clients had been wealthy and never thought they'd find themselves in bankruptcy court. Others were indigent and sought a fresh start.

 

Squires has about 5,200 active cases, the most he's ever had in his 23 years as a bankruptcy judge. Most of the typical reasons for filing for bankruptcy - job loss, medical bills or credit card debt - were exacerbated with the recession. And his caseload is expected to get worse by the end of the year.

"The recession has not bottomed out yet on Main Street," he said.

In the suburbs, the housing crash, coupled with the loss of good-paying jobs, drives many of the bankruptcies, which are increasing at a faster pace in northern Illinois than in the state as a whole or the nation.

Yet, bankruptcy is not an easy fix. The cost of bankruptcy surprises many people, who wonder how to find thousands of dollars for filing and attorney fees in their already-squeezed budgets.

Financial counseling is mandatory, at the filer's expense, and cases can take from six months to five years to complete. People who don't meet certain financial criteria to file Chapter 7 and have their debts erased are forced into Chapter 13 and a payment plan.

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Chapter 13 cases jumped 54 percent between March and August, with more than 1,900 filings in Lake, DuPage, Kane, Will, Kendall, Grundy and LaSalle counties, said Glenn Stearns, a Chapter 13 trustee based in Lisle.

As trustee, Stearns handles cases where consumers in bankruptcy are put on a payment plan to repay their debt. They hand over a check to the trustee, who in turn, pays the creditors.

Nationwide, consumer bankruptcy filings of all types have increased about 15 percent to 781,150 for the first six months of this year, compared to 681,217 during the same period in 2009, according to Washington, D.C.-based American Bankruptcy Institute.

In Illinois, personal bankruptcy filings for the first half of this year were up 20 percent, at 41,603, compared to 34,738 for the same period last year an increase almost entirely attributed to new bankruptcies in the northern district, which covers the northern third of the state.

                                                                                                                                                                                                                       
 

That's despite new federal bankruptcy laws since 2005 designed to make it harder to claim bankruptcy.

"The new bankruptcy laws were designed to make it more difficult and more expensive to file, which it's done," said Stearns. "But you can't stop a tidal wave with an umbrella."

Most of the cases are due to people who have lost their jobs and are about to lose their homes as well, said Stearns.

The Chapter 13 office had about 2,500 active cases at a given time. Now, the office has about 7,100. He's had to double the number of employees to 24, just to handle the extra load.

"It used to be real common for people to tap their home like a piggy bank, but people can't do that anymore," Stearns said. "The credit market is down and housing prices have crashed."

Judge Squires, who lives in Wheaton, primarily sits in downtown Chicago's U.S. Bankruptcy Court. But for the past 16 years, he schedules every Friday in the Wheaton courtroom, moving aside tables inside the grand jury room and setting up a makeshift bankruptcy court. It helps to accommodate suburban consumers, who perhaps cannot afford the trek to the city and the high cost of parking. It also accommodates local lawyers, who can use their time more efficiently and help streamline the process.

Beside DuPage, federal bankruptcy judges also offer suburbanites a chance to keep their cases local in Lake, Kane and Will counties.

Squires says about two-thirds of his cases are Chapter 13 bankruptcies. In cases he handles, the majority of debt is related to homeowners who owe more than their homes are worth. Couple that with a job loss or mounting medical or credit card bills, and it overwhelms them. In some cases, a divorce can lead to one partner losing everything.

"But the recession has made their problems much worse," Squires said.

As the cases continue to mount, Squires advises those seeking bankruptcy to pay close attention to the financial counseling they're required to get at the beginning and end of their court proceedings.

"When they start life over," he said, "they need to learn to live on a budget."