Posted on August - 30 - 2010
Consumers paying more to file for bankruptcy
Most Americans who file for bankruptcy protection do so as a last resort because they do not have the funds to meet their financial obligations. Ironically, those seeking this form of debt relief will see the cost of filing increase, as evidenced by a new study.
The American Bankruptcy Institute Law Review has released information revealing that the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 has made filing a more tedious and expensive process. According to the publication, individuals planning to file either Chapter 7 or Chapter 13 bankruptcy may see their costs increase by as much as 55 percent.
These expenses are associated with credit counseling courses, trustee costs, filing fees and payments for attorney and professional services. Chapter 13 filers who paid average fees of $2,930 in 2003 and 2004 saw the costs rise to roughly $4,077 in 2007 and 2008. During those same periods, consumers who sought Chapter 7 bankruptcy protection saw their costs jump from $900 to $1,399.
“The government’s stated goal in passing bankruptcy reform was to eliminate abuse of the system and create a set of higher eligibility standards for consumers, but this is the first time that the financial impact of those standards has been quantified,” attorney and author of the study Lois Lupica said.
Consumers who file for bankruptcy are required to pass a “means test” under the 2005 legislation and also enroll in and complete a financial education course prior to receiving relief. As more Americans find it difficult to secure employment and risk defaulting on their credit card bills and mortgage loans, the number of consumers expected to file bankruptcy by the end of the year has increased to more than 1.3 million.
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