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In bankruptcy court, lives are turned upside down in minutes
(Virginian-Pilot, The (Norfolk, VA) Via Acquire Media NewsEdge) Nov. 2--NORFOLK -- It's 9:32 a.m. U.S. Bankruptcy Court Judge Frank J. Santoro takes the bench in Courtroom 2. He wastes no time diving into the lengthy docket.
The cases move fast -- assembly-line fashion. Most last no longer than a couple of minutes. Several are as brief as 20 seconds. All involve people deep in debt and unable to pay their bills.
"Item Number 5: Linwood Turner," the courtroom deputy intones.
Linwood Turner isn't there. An attorney for Southern Trust Mortgage LLC steps forward and tells Santoro that the debtor is 12 payments behind. The lender would like permission to take the property. The judge asks a few questions.
"Relief is granted," he concludes. Turner could now lose his Chesapeake home.
There's no drama. No emotion. The Oct. 21 docket is part of a routine that plays out week after week in the federal courthouse on Granby Street.
Today, Santoro will take 70 minutes to whip through 40 cases. Each represents a life roiled by financial trouble.
More local residents are finding themselves here. In U.S. Bankruptcy Court's Eastern District of Virginia in Norfolk, which covers South Hampton Roads, the number of personal bankruptcy petitions filed as of September this year jumped 46 percent from the same period in 2007, to 3,260. Filings in 2008 so far have surpassed the total for all of 2007 by almost 5 percent.
For some consumers, credit-card balances have grown out of control. For others, a sudden loss of income, maybe from a job layoff, or costly medical problems render them unable to pay their bills. Many are casualties of the housing crisis.
In the courtroom, dark-suited lawyers stand up from the pew-like benches one by one and make their cases to the judge. Most represent lenders that want to collect their money or seize houses or vehicles from an individual who has failed to pay on time.
"Item Number 48: Jamie Hamilton," the courtroom deputy calls.
Hamilton has filed under Chapter 13 of the U.S. bankruptcy code. Consumers who file under Chapter 13 often are looking to save their homes from foreclosure, to hang on to their property while they continue to pay it off. Those debtors and their creditors work out a repayment plan, which the court must approve and a U.S. trustee must oversee.
Hamilton has fallen behind in her payment plan. Her father, who has helped cover her debts, is a painter who has lost work since the housing downturn, her lawyer explains.
"And he can't do anything else, I'm sure," Santoro says, his sarcasm raising a chuckle from some in the courtroom. He agrees to let Hamilton remain in her payment plan as long as she covers the shortfall.
During the hearings, Santoro mostly asks questions. He clarifies details and listens intently, sometimes putting the arm of his eyeglasses between his lips. He cuts a strapping figure on the bench, sitting in a green leather chair, framed by the dark wood paneling of the courtroom. The former corporate bankruptcy attorney became a judge in January.
His approach is no-nonsense. He will chastise an attorney for improper paperwork or stop an objection in mid-sentence when he knows where it's going. But he isn't unyielding. He'll reschedule for an otherwise prompt attorney who has inexplicably missed a hearing. He'll take time to make sure a debtor understands the court's decisions and its consequences. That's if the debtor even shows up for court, which most don't.
"Item Number 103: Tracey Wiggins."
Wiggins has filed for bankruptcy under Chapter 7. Most consumers file Chapter 7 to get out from under their debts, often a pile of credit cards or medical bills. Typically, they walk away from their assets, including a house if they own one, but their balance sheet is wiped clean.
"We call them fresh starts," said Edrie Pfeiffer, a Virginia Beach bankruptcy attorney who has represented debtors for more than a decade and spends many days rushing between the courtroom and 341 hearings, where debtors review their assets with an appointed trustee.
Wiggins, wearing a light-blue hooded sweatshirt and slacks, stands next to her lawyer in court. She wants the judge to let her keep two cars: a 2002 Cadillac DeVille and a 2000 Ford Windstar. Her bank account has a negative balance, her lawyer explains, and her husband is paying off the loan on the Cadillac.
Santoro asks where her husband works. As a bellman, she says, at the Sheraton Norfolk Waterside hotel.
The judge is skeptical. "Can you explain why I would allow you to legally obligate yourself?" he asks, pointing out that she is "upside down" in owing more than the car is worth. As long as the lender continues to let her finance the Cadillac, Wiggins replies, she thinks it will help her credit rating.
Wiggins' bankruptcy filing shows $45,660 in unsecured debts, those not backed by property. They include several from payday lenders, credit cards, unpaid rent, medical bills and jewelry and furniture purchases.
"I have to make the decision that this is in your best interests," explains Santoro, noting that the arrangement most benefits her husband and the bank. "I don't see how this is going to be a good deal for you."
He denies her request.
Six blocks down Granby Street, another part of the bankruptcy process unfolds. In a windowless room of the federal building, debtors appear for their 341 hearings. Here a trustee tries to find out whether the individual has anything of value to recover and distribute among creditors.
Property that's old and worth little or that's worth less than the debtor owes typically gets "abandoned," meaning the trustee leaves it for the bank to take or the debtor to keep. Debtors who want to hold on to an item must negotiate with the lender to "reaffirm" the debt, and the court has to approve it.
U.S. Trustee Charles L. Marcus interviews more than 40 debtors this October morning. He starts each 341 session with a speech that's both instructional and philosophical.
"Today's a good day for a little self-introspection," he says. "The majority of you are here today because you haven't handled your finances very well."
Each debtor is sworn in under oath and sits at a table next to Marcus. The trustee has a professorial air and a wry sense of humor. Peering over his glasses, he asks questions about child support, employment, life insurance, income tax refunds and any money recently inherited from someone's death.
"Got yourself overdone in credit cards?" Marcus asks one woman, well aware of the answer from her paperwork. Jessica Stepanovsky is single and works for the company that operates the shoe department inside Kmart stores.
"Yeah," she replies sheepishly. "Unfortunately."
When Jackie and Mark Burley come to the table, Marcus asks about the value of their 2008 Mini Cooper, which they want to keep. They tell Marcus about trying to sell their house but having trouble after prices fell.
Before they filed for bankruptcy, the Burleys always tried to handle their finances well. The couple paid off their bills with each paycheck, Jackie Burley says. They prided themselves on carrying no balances.
"I'm not going to get in over my head," Jackie would tell herself.
They made a good living, both working for a media research company. In 2006, they bought a townhouse in the River Pointe development in Suffolk for $341,000, financing most of it to put down extra money on upgrades. They planned to retire there and thought the strong real estate market would only boost their home's value.
"We took all our savings, everything we had, and put it all into that house," Jackie says.
In April, the company restructured and Jackie lost her job. Without her $58,000-a-year salary, the couple couldn't pay their mortgage. They looked to sell the house, but prices of similar properties had dropped to $299,000, not enough to cover their loan.
A lawyer advised bankruptcy. In September, they filed under Chapter 7. They left their home to the mortgage company and rented a place in Norfolk.
"When we were told we had to do this, it was just devastating to me," Jackie says. "It was the last thing I wanted."
After their hearing, the Burleys talk about the future. This year, they will give up the annual vacation they take with their children and grandchildren, Jackie says. They can't think about buying another house, about having a place of their own when they retire, Mark says.
"Dreams that we had for other things are shot, for now."
Carolyn Shapiro, (757) 446-2270, carolyn.shapiro@pilotonline.com bankruptcies on the rise
To see more of the The Virginian-Pilot, or to subscribe to the newspaper, go to http://www.pilotonline.com.
Copyright (c) 2008, The Virginian-Pilot, Norfolk, Va.
Distributed by McClatchy-Tribune Information Services.
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