AT THE WHEEL: The growing business at places like Regal Motors, a car dealership on Mount Moriah Road that provides financing for people in bankruptcy, points to a high number of bankruptcy filings in West Tennessee. -- Photo By Andy Meek

For debtors, it can be one of the most insufferable indignities of the bankruptcy process.

When their cars are seized or repossessed by anxious creditors, showing up for work, trekking to the bank and the other mundane tasks that must be accomplished to get a financial fresh start can become logistical nightmares.

That's why, over the past year, at least one used car lot in Memphis has made a point of reaching out almost exclusively to bankruptcy debtors.

Regal Motors, a dealership at 2496 Mount Moriah Road, offers a financing arrangement in which anyone with a low credit score, including people with active Chapter 7 or 13 bankruptcy cases, is eligible to buy a car with a no-deductible warranty and given the opportunity to patch their credit history back together.

Good people, bad experiences

Regal, owned by Skip Gronauer, started its rent-to-own financing program in April 2005. Tax season is traditionally the peak season for the auto industry, so Regal is making a big push to educate customers and to form partnerships with tax offices and bankruptcy law offices.

Undeniably, though, the program works and was started in the first place because of one black eye on West Tennessee's national reputation: its designation as one of the highest-volume sections of the country for bankruptcy filings.

"I had people coming in all the time who had money but also had horrible credit and then had something bad happen that they were unprepared for," Gronauer said. "And it just takes one little blip where they're thrust into something bad like this."

The data prove the assumption that a large market of debtors exists and stands to benefit from the kind of program Regal is offering. In 2006, 13,978 people filed for bankruptcy in West Tennessee - or about double the population of Lakeland.

The U.S. Bankruptcy Court has offices in Memphis and Jackson, but debtors can come from anywhere to file.

"These people have got to have transportation," Gronauer said. "And there's a gap where somebody has a computer program that's spitting out a report and saying, 'Okay, you don't meet our score.' But we're not score driven. Just because these people have credit problems, they're still people.

"There's a lot of good people out there who just have bad things happen to them."

Dude, where's my car?

Past credit issues aren't a factor in Regal's rent-to-own program. Furthermore, no court approval is needed, unlike traditional financing deals in active bankruptcy cases.

Business has been steady for Regal over the past year, due in part to the passage in 2005 of the Bankruptcy Abuse Prevention and Consumer Protection Act, a new 500-page set of reforms Congress hoped would curb unnecessary bankruptcy filings.

Before that, if a debtor owned a car for which the loan was worth more than the car itself, the court was allowed to do what's called a "cram down" - or matching the debt to the car's value.

But among other tweaks in the new legislation, debtors now have to own the car for more than two years for that to occur. Thus, more debtors are being left without rides and turning to Regal for help.

Cars, of course, aren't the focal point of bankruptcy problems in West Tennessee.

In general, bankruptcy filings in the local judicial district have declined sharply over the past year, mainly because of the new law.

Big difference

A breakdown of filings shows Chapter 7 cases - in which a person's debts can be liquidated completely - were down 73 percent from 10,270 in 2005 to 2,745 in 2006.

Chapter 13, or "wage-earner cases" - the most common in West Tennessee, in which the court sets up a repayment plan for the debtor - were down 30 percent from the nearly 16,000 filings in 2005 to 11,186 in 2006. On the whole, total bankruptcies filed in 2005 numbered about 26,300 - roughly double the amount filed in 2006.

The raw numbers, by themselves, suggest the bankruptcy reforms, the most comprehensive in a generation, are having the effect Congress intended: to curb bankruptcies across the board.

Whereas the "bus stop" - the term given by bankruptcy attorneys to the waiting room on the sixth floor of 200 Jefferson Ave. - used to be an even more chaotic place, far fewer debtors are waiting there these days to file their cases.

What a difference a year, and a monumental piece of Congressional legislation, makes.

"I think that there is still considerable uncertainty and some debate as to whether or not the future will result in more or less bankruptcy filings," said David Kennedy, chief bankruptcy judge for the Western District of Tennessee. "I still think it's a little too early to tell, although I do think maybe by this summer we'll have a much better indicator of where the case filings are going."

Debt to society

Judging from filings over the past three years, debtors who live in Frayser and the community that encompasses South Third Street are in the worst financial straits. Filers there, who live in the 38127 and 38109 ZIP codes, were at the top of the list each year for total bankruptcy filings - Chapters 7 and 13 combined.

The implementation of the new bankruptcy act brought on a rush of filings in 2005 to get in under the gun before the law changed, yet that didn't cause quite the surge in the yearly totals that might have been expected.

In 2004, there were 24,878 bankruptcies; in 2005, that total was up to 26,290. Last year, the total fell sharply to 13,978. (For details on the law's effect on filings, see the sidebar above.)

Fourth-quarter glance

The new law went into effect in October 2005, so a look at fourth quarter numbers gives some indication of the influence it's had. In the last three months of 2004, there were 5,814 bankruptcy filings in West Tennessee.

In fourth quarter 2005 - which saw the late surge of debtors before the new law took effect - the total was up to 6,430. Of those, 5,127 were in October, while 1,303 were in November and December combined.

With the more stringent legislation now in place, though, fourth quarter 2006 saw the total drop to 3,823 filings.

But while it's now more difficult and cumbersome to file a bankruptcy petition, attorneys and judges suspect filings nevertheless may be creeping back upward, since Congress used the new law mainly to target abusive filers, not the worst-off debtors.