NEW
YORK, PRN - GHN News Editor - While recent news discusses the increase in bankruptcies in the
United States, the costs of filing for either Chapter 7 or Chapter 13
have increased greatly since the 2005 tax reform.
YORK, PRN - GHN News Editor - While recent news discusses the increase in bankruptcies in the
United States, the costs of filing for either Chapter 7 or Chapter 13
have increased greatly since the 2005 tax reform.
The
law was to cut down on paperwork, streamline bankruptcy filing and get
rid of those who were just ducking and running from paying taxes and
making it a more serious situation.
law was to cut down on paperwork, streamline bankruptcy filing and get
rid of those who were just ducking and running from paying taxes and
making it a more serious situation.
But
with the new law, also came a dark cloud, more shame in filing for
bankruptcy. It was getting tough to do it, and it was tougher yet to
face creditors and friends, those who manage bankruptcy filings explain.
with the new law, also came a dark cloud, more shame in filing for
bankruptcy. It was getting tough to do it, and it was tougher yet to
face creditors and friends, those who manage bankruptcy filings explain.
Attorneys
also tell us that filing for bankruptcy has also risen significantly in
upfront costs, most of these having to do with attorney fees.
also tell us that filing for bankruptcy has also risen significantly in
upfront costs, most of these having to do with attorney fees.
The study, authored by New York bankruptcy attorney Lois R. Lupica of Thompson & Knight LLP
and funded by the American Bankruptcy Institute (ABI) and the National
Conference of Bankruptcy Judges (NCBJ), shows how consumer bankruptcy
is a "far more complicated process than it was prior to the 2005
amendments.
and funded by the American Bankruptcy Institute (ABI) and the National
Conference of Bankruptcy Judges (NCBJ), shows how consumer bankruptcy
is a "far more complicated process than it was prior to the 2005
amendments.
"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," says Ms. Lupica, who also serves
as a Maine Law Foundation Professor of Law at the University of Maine
School of Law in Portland.
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," says Ms. Lupica, who also serves
as a Maine Law Foundation Professor of Law at the University of Maine
School of Law in Portland.
The
study looked at data from consumer bankruptcy cases in judicial
districts located in Florida, Illinois, Georgia, Maine, Utah, and West
Virginia. The costs to consumers was defined as debtor's attorney fees
and expenses, trustee fees and expenses, filing fees, credit counseling
and debtor education fees, and any other professional fees.
study looked at data from consumer bankruptcy cases in judicial
districts located in Florida, Illinois, Georgia, Maine, Utah, and West
Virginia. The costs to consumers was defined as debtor's attorney fees
and expenses, trustee fees and expenses, filing fees, credit counseling
and debtor education fees, and any other professional fees.
For
the sample of Chapter 13 cases, the study found that the median cost
for consumers was $2,930 in 2003 and 2004, with an increase to $4,077 in
2007 and 2008. For Chapter 7 cases in the same periods, the costs
increased from $900 to $1,399.
the sample of Chapter 13 cases, the study found that the median cost
for consumers was $2,930 in 2003 and 2004, with an increase to $4,077 in
2007 and 2008. For Chapter 7 cases in the same periods, the costs
increased from $900 to $1,399.
"Attorney
fees are just part of the required administrative expenses that may
have contributed to the overall decline of consumer bankruptcies, even
in the face of the public's increased debt load, foreclosures, and loan
defaults," Lupica says.
fees are just part of the required administrative expenses that may
have contributed to the overall decline of consumer bankruptcies, even
in the face of the public's increased debt load, foreclosures, and loan
defaults," Lupica says.
While
the overall number of consumer bankruptcy filings has declined since
passage of the 2005 reforms, they have risen during the recession.
There were 149,268 consumer bankruptcies filed in March 2010, which
represented the highest monthly total of consumer filings since the
reforms were enacted. The March filing total represented a 34 percent
increase from the February filing total of 111,693 and a 23 percent
increase from the March 2009 total of 121,413.
the overall number of consumer bankruptcy filings has declined since
passage of the 2005 reforms, they have risen during the recession.
There were 149,268 consumer bankruptcies filed in March 2010, which
represented the highest monthly total of consumer filings since the
reforms were enacted. The March filing total represented a 34 percent
increase from the February filing total of 111,693 and a 23 percent
increase from the March 2009 total of 121,413.
"Greater
up-front costs may have hindered some consumers from filing bankruptcy,
but there may be other factors at play," Lupica says. "There was a
large volume of negative publicity in the aftermath of the 2005
amendments, as well as heightened efforts by aggressive debt collection
and consolidation firms."
up-front costs may have hindered some consumers from filing bankruptcy,
but there may be other factors at play," Lupica says. "There was a
large volume of negative publicity in the aftermath of the 2005
amendments, as well as heightened efforts by aggressive debt collection
and consolidation firms."
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