I read a very interesting article last night on the National Association of Consumer Bankruptcy Attorneys website. The article can be found here. It seemed obvious, but it has been confirmed by the U.S. Government Accountability Office that Chapter 7 debtors are paying, on the average, around $556.00 more to file a chapter 7 under the new bankruptcy laws. That, according to NACBA is about a 60% increase. Total costs for a Chapter 7 filing before the 2005 bankruptcy law changes averaged around $921 ($712 for attorney fees, $209 court filing fee, and $0 for mandatory credit counseling/debtor education) versus $1,477 for total average costs for the same type of filing after the 2005 law ($1,078 for attorneys fee, $299 for court filings, and $100 mandatory credit counseling/debtor education).
The new bankruptcy laws were pushed into existence by the major credit card companies. There were talks that one reason the creditors wanted the new laws was to delay the filing of a debtor's bankruptcy case by a few months. This delay meant that the creditor could either obtain a few more payments from the consumer before they filed for bankruptcy or they could obtain a judgment and start a garnishment before the consumer filed the bankruptcy. Therefore, this delay in filing for Chapter 7 bankruptcy means millions and millions of more dollars in the creditors pocket.
The $550 hike in costs is a huge advantage for creditors. First, as stated above, it delays the filing of the case by a few months. Second, many people just can not afford to pay the fees to get their Chapter 7 Bankruptcy case filed. Therefore, they either do nothing (of which means that they will probably have a garnishment filed against them which means 25% of their gross pay goes to the creditor garnishing), they file their case without an attorney (which could lead to their case being dismissed for not filing the correct documents or them losing certain assets through the trustee liquidating their assets), or they file a chapter 13 to pay back their creditors (Chapter 13 is usually cheaper up front to file than a chapter 7 but typically pays the creditors back more money than if the debtor had filed a chapter 7).
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