By: Gerri L. Elder
When the mortgage market turned sour, many Americans were left with more debt than they could handle. Unfortunately, rising food and fuel prices have only worsened the financial situation in much of the country.
While filing bankruptcy has traditionally provided an escape route for those whose financial obligations have gone beyond their control, the 2005 changes to bankruptcy laws may mean that, because of new filing requirements, some cash-strapped Americans may actually be too poor to get the protection bankruptcy offers.
A recent article in the Wall Street Journal describes how the cost of bankruptcy has risen dramatically since the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) took effect in 2005.
According to the WSJ, the new requirements introduced by BAPCPA, including the means test in Ch 7, translate to more hours of work for bankruptcy lawyers handling cases. This, in turn, means that lawyer's fees are higher for those filing bankruptcy.
A report from the U.S. Government Accountability Office apparently found that the increase in fees comes to about 51%, to more than a thousand dollars for Chapter 7 cases filed in February and March of 2007. Before BAPCPA, lawyer's fees were reportedly just over $700.
And for those looking to file under Chapter 13 bankruptcy, lawyer's fees have risen to about $3,000, from $2,000 before the law change.
But those filing for bankruptcy have been hit with other fees, as well: accountability fees have risen $90 for Chapter 7 cases and $80 for Chapter 13 cases, sources indicate; further, the BAPCPA-mandated credit counseling requirement and debtor education course cost bankruptcy filers extra money.
All of this has evidently led the President of the National Association of Consumer Bankruptcy Attorneys to declare that increased costs of filing bankruptcy are serving to prevent needy Americans from filing - and therefore from getting the protection they so badly need.
Consumer advocates have often denounced BAPCPA as unfairly benefiting large credit card corporations and penalizing Americans who are genuinely in need of financial relief.
Indeed, it seems credit card companies spent tens of millions of dollars over a decade lobbying for the changes to bankruptcy law which eventually passed as BAPCPA. Considering the origins of this legislation, it's hardly surprising that its requirements mean that many struggling Americans are literally finding themselves too poor to file bankruptcy—and therefore still obligated to pay their creditors.
So what choices do you have if you're struggling with your finances? Luckily, Total Bankruptcy can put you in touch with a bankruptcy lawyer in your area for a free, no-obligation consultation.
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