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Georgia: Bankruptcy cases
[June 09, 2008]

Georgia: Bankruptcy cases

(Chattanooga Times (Free Press, TN) (KRT) Via Acquire Media NewsEdge) Jun. 9--As a 23-year-old construction worker struggling to find work in a depressed home-building market, Josh Wallin came to Chattanooga last month to file for bankruptcy relief from his creditors.

Although in another state, the federal courthouse downtown took only half as long to reach for the LaFayette, Ga., resident than if he had driven to the nearest Georgia courthouse 42 miles away in Rome.

"Rome is pretty far away for me, so it just makes more sense to file in Chattanooga," Mr. Wallin said.

But a recent federal appellate court ruling soon could limit the ability of North Georgia residents such as Mr. Wallin to come to Tennessee to file bankruptcy claims even if the Chattanooga court is more convenient.

Such a border barrier could spark another battle between two states already sparring over how to divide the region's water supply.

Georgia may not yet be successful in its border battle for water from the Tennessee River. But the Peach State could lay claim to more bankruptcy cases -- and millions of dollars in legal and court fees -- that now end up in U.S. bankruptcy courts in Tennessee.

Although no policy change has been made yet in Chattanooga about cross-state filings, one of the 21 U.S. trustees who represent the government in bankruptcy courts has objected to border crossings from Mississippi residents into the Memphis bankruptcy court, and a Memphis bankruptcy judge has moved to enforce the border.

Chattanooga bankruptcy attorneys worry that a similar change in Chattanooga could prove costly for them and many financially troubled North Georgians.

"For the 37 years I've practiced law, debtors and creditors have been able to have their hearings in Chattanooga where it is more convenient for many people who live in Georgia but may work or have creditors in Chattanooga," bankruptcy attorney Tom Ray said. "Now the (U.S.) trustee is considering making all cases from North Georgia be filed in Rome. This would be a terrible hardship on debtors who are already financially strapped, especially right now with the high price of gasoline."

Last year, 1,049 North Georgia residents filed for bankruptcy relief in Chattanooga, representing more than one of every six cases filed here, according to the Eastern Tennessee district of the U.S. Bankruptcy Court.

But a 4-year-old case along the Tennessee-Mississippi border near Memphis threatens to create a new border fence there against people crossing state lines or federal districts to file bankruptcies.

In 2004, the U.S. trustee's office in northern Mississippi moved to transfer out of the Memphis court two bankruptcy cases from Mississippi debtors.

After conflicting rulings in bankruptcy and federal district courts, a three-judge panel of the U.S. Court of Appeals for the 6th Circuit in Cincinnati ruled that bankruptcy cases should be filed in the same judicial district in which the debtor lives. Previously, many bankruptcy courts have accepted filings outside their district as a matter of convenience unless a creditor or debtor objected.

In a seven-page opinion, Chief Judge Danny Boggs said venue requirements of the bankruptcy code "are mandatory and not optional" and therefore debtors from Mississippi should not cross the state line to file their bankruptcy case in Memphis.

If the U.S. trustee opts to apply such a standard in Chattanooga, more bankruptcy cases from North Georgia -- and the attorneys and court personnel to support the caseload -- could be headed for Rome.

Chattanooga bankruptcy attorney Eron Epstein, who said 24 percent of his cases now come from Georgia, said he may be able personally to make arrangements to handle cases headed to Rome. But he said it would be unfair to force many financially troubled North Georgians who may work in Chattanooga down to Rome for debt relief.

"With gas at $4 a gallon, this would be a real hardship for people who can least afford the time and resources to drive to Rome," he said.

Most of the attorneys for debtors and creditors in this region use the Chattanooga bankruptcy court building on 11th Street in downtown Chattanooga, he said.

U.S. Bankruptcy Court Judge Thomas Stinnett, one of two bankruptcy court judges in Chattanooga, said the local court "has always maintained close connections" with the North Georgia bankruptcy courts in Rome and Atlanta.

"This is something that we've known about for a considerable period, and we would certainly accommodate them on whatever may be needed," he said.

But whether a policy change is made for Chattanooga may end up being decided by either U.S. Trustee Richard Clippard in Memphis or U.S. Trustee Donald Walton in Atlanta, either of whom might object to bankruptcy filings from Georgia residents in Chattanooga. Jane Limprecht, public affairs officer for the U.S. trustee's executive office in Washington, D.C., declined to discuss any plans to object to cross-state filings.

"We don't comment on matters beyond the public record, including questions relating to possible future actions or policies," she said in a prepared statement.

The bankruptcy section of the Chattanooga Bar Association has scheduled a June 24 meeting to talk about the venue issue with William Sonnenburg, assistant U.S. trustee in Chattanooga.

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