"I believe it will be every bit as bad as '82, if not worse," said Robert Guell, an economics professor at Indiana State University. "Which will mean things won't get substantially better until 2010."
In the first half of this decade, according to the Washington, D.C.-based American Bankruptcy Institute, Indiana saw 48,000 to 56,000 bankruptcies annually, with a spike in 2005 when filers rushed to apply under the old rules. Filings fell off substantially the next year.
But now the numbers are on the upswing again. Statistics for 2008's third quarter are not yet available, but in the first half of this year, Indiana saw 18,762 filings. That's the 10th-highest total in the nation, although neighboring states Ohio, Michigan and Illinois all had more.
Bankruptcy attorneys said filers these days often are in deeper trouble than ever before. But their options are fewer.
Gary Hostetler, a bankruptcy attorney with locally based Hostetler and Kowalik PC, said he's representing more professionals who had six-figure salaries before getting laid off. Now they're under water on mortgages against high-end homes.
And Hostetler's small-business clients -- who once would have sought reorganization -- now often have no choice but liquidation. Banks are willing to restructure loans, Hostetler said. But new terms don't matter if a company isn't booking sales.
"Honestly, it's going to get a lot worse before it gets better," he said. "The problem is, right now, if the banks wanted back their collateral, they could easily have it. But there's not much business can do with it. Until consumers start spending, there's not going to be cash generated for debt service. Banks already have a lot of real estate. They don't want more." Bankruptcy attorney Mark Zuckerberg still handles lots of filings driven by traditional problems, like divorce, medical bills or job loss. But these days, he's also observed a glut of bankruptcies from people related to the real estate industry: mortgage brokers, agents, roofers, framers and carpet installers.
"Nobody has equity in their homes. They've already socked all the equity out because they tried to avoid coming to me," Zuckerberg said. "So builders aren't building and painters aren't painting."
Experts say the reality may be even bleaker than statistics show. Because passage of the more restrictive bankruptcy legislation three years ago was so well-publicized, many people assume they can't resort to bankruptcy, said Henry Sommer, president of the Washington, D.C.-based National Association of Consumer Bankruptcy Attorneys. And those who do file bankruptcy are more desperate, since filing fees are higher and fewer debts can be written off.
"It is more difficult and burdensome and expensive to file [now]," Sommer said. "Who knows what the numbers would be if we were still under pre-2005 law?"
Guell, the Indiana State University economist, said businesses that sell things people can't do without at a discount are likely to fare best in the current economy, while those that offer luxuries will struggle.
That jibes with the advice credit counselors are offering people trying to avoid bankruptcy.
Cindy Pratt, director of counseling and customer services for locally based Momentive credit counseling, often advises clients to live on a "crisis budget" that cuts expenses to the bone. That doesn't just mean selling their boat or Mercedes. For many, it involves scrambled eggs for dinner and shopping at Goodwill for kids' clothes.
"At the grocery store, you're going to buy beans, cornbread and hamburger rather than buying steaks," Pratt said. "You really can, if you really want to, avoid bankruptcy. Sometimes it really is workable just by changing your lifestyle, your choices, and going into that crisis mode."
President-elect Barack Obama is expected to fast-track an economic stimulus package next year. But Guell said the impact won't be felt immediately, since Obama aims to spend much of the money improving crumbling U.S. infrastructure. It'll take most of the year for projects to be planned, let alone executed.
That means next year will probably be a long one for bankruptcy attorneys like Hostetler and Zuckerberg.
"Even if the bill is awaiting President Obama's signature at 12:01 on Jan. 20, the money will take months to get into the hands of people who will actually spend it," Guell said.
"If you believe, as do I, this is a different kind of recession than 2001 and 1991 and other relatively short, shallow recessions, that's the kind of stimulus you need. But the downside is, you don't feel the stimulus nearly as quickly as you do with an immediate tax rebate."