The uncertain fate of bankruptcy reform in Washington has created a kind of worst-case scenario for creditors: accelerating filings with dwindling prospects of legislative relief.

Bankruptcy lawyers have capitalized on the shifting landscape, using billboards and pop-up alerts on Web sites of lawyers to pitch their services, in some cases using the Bankruptcy Reform Act of 2001 as a marketing pitch for filing now rather than risking the more rigid guidelines of the proposed law.

Though the bill was passed by both the House and the Senate in March and is supported by President Bush, its passage is by no means a certainty. The bill is currently waiting to come before a House-Senate conference committee, and, depending on whom you ask, the recent shift to the Democrats in the Senate may either complicate or ease passage.

Whatever reason is attributed to the rise in filings, there is no disputing that first-quarter bankruptcy filings were the second highest in any quarter, according to the Administrative Office of the U.S. Courts. Personal bankruptcy filings totaled 356,836, up 17.8% from a year earlier. (Business filings fell 5.5% to 35,992.) In the 12 months that ended March 31, 1.27 million personal bankruptcies were filed, up from 1.26 million in the preceding year.

The record quarter for combined business and personal bankruptcy filings was the second of 1998, but the latest quarter also set a record.

"First-quarter filings in 2001 are higher than in any other first quarter before," said Samuel J. Gerdano, executive director of the American Bankruptcy Institute, a privately funded nonpartisan organization. "You have to ask, 'What's happening that didn't exist in the other first quarters?' "

Stuart Feldstein, president of SMR Research, a market research and scoring firm in Hackettstown, N.J., said his firm had been predicting the uptick since last year, when the economy began to soften.

"The real problem, I think, is that with the economic boom, more people were making more money and buying new stuff. If their income stayed the same, they could have managed their debts. But suddenly the economy softened, and these highly indebted people had no savings," he said.

The most recent numbers do not fully bear out the case that consumers are simply racing the clock. For example, consumers do not appear to know that the bill affects Chapter 7 filers (whose debts are absolved) more than Chapter 13 filers (whose debts must be repaid). The proposed legislation, which would push more filers into Chapter 13, would seem to provoke a spike in Chapter 7 filings. But statistics from the first quarter show roughly the same proportion of Chapter 7 to Chapter 13 filings as has been maintained for years.

Some felt the surge, regardless of its characteristics, pointed to a broad misunderstanding of what reform might bring. "There is a lot of misinformation out there," said Keith Leggett, senior economist at the American Bankers Association. "People think they are not going to be able to file for bankruptcy at all. They don't understand that probably only about 3% to 10% of Chapter 7 filers are going to be affected," he said.

Mr. Feldstein said some provisions of the reform act might be particularly troubling to bankruptcy lawyers. One provision of the bill in particular would provoke a preemptive strike by the bankruptcy lawyers, Mr. Feldstein said. "The new law requires you to sit down with a nonprofit credit counseling service before you can file. Bankruptcy lawyers, who are for-profit, do not want that to happen."

But some credit counselors say the requirement is just a cumbersome formality that would not actually help people to get out of debt. "At that point, most people have already made up their minds to file and have already paid their attorneys. Seeing a credit counselor isn't going to motivate them to do anything else. The new law just makes filing a more bureaucratic process," said Steve Rhode, the president of myvesta.org, a credit counseling center in Rockville, Md.

Mr. Gerdano of the American Bankruptcy Institute sees three possible outcomes for the pending bill.

The first, he said, is that the Democratic majority will expedite the Senate's selection of its representatives to the conference committee with the House. Though there would be more Democrats than Republicans on the committee, he said, "there would be enough Democratic conferees that support the bill, which would give the Republican minority a functional majority in the conference."

The second possible outcome is a backlash by the new majority. Mr. Gerdano said that though the new Senate majority leader, Thomas A. Daschle, voted for the bankruptcy bill in March, there is still room for persuasion. "He's from South Dakota, which is a big Citibank state, but he doesn't just speak for himself. There are other people in the caucus he has to listen to," Mr. Gerdano said.

If the Democrats were to scrap the old bill and start over, added Mr. Gerdano, a third scenario could emerge. "If Kennedy and Wellstone up-end the entire apple cart, the House has the option of taking the Senate bill, signing it, and taking it to the White House. They wouldn't be able to knock off the offending Senate provisions, but … if you can't get a bill to your liking in a conference, you may just take that bill and swallow it," he said.

The offending Senate provisions referred to by Mr. Gerdano include a homestead provision, which would challenge laws in five states that exempt bankruptcy filers' homes from being classified as equity to repay their debts.

Travis Plunkett, legislative director for the Consumer Federation of America, who has been lobbying against the bill, said the House is not likely to swallow the homestead provision. "When pigs fly," he said.


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