Saturday, May 12, 2012

Many American Debtors are Too Poor to File Bankruptcy

Many American families are too poor to file for bankruptcy, according to a recent article in CNNMoney.  Hefty filing fees may be preventing struggling consumers from taking the difficult, yet increasingly important, step toward getting out from under their crushing debt.  Recent research submitted to the National Bureau of Economic Research shows that the average cost to file for Chapter 7 bankruptcy protection is more than $1,500.  Those of us working in Chicago bankruptcy law know that making the decision to file for bankruptcy is never easy.  It can be difficult to admit you need help, but our attorneys are here to answer your questions, as well as to assist you as you consider all of your options. 

Why is filing for bankruptcy so expensive, potentially prohibitively so, for the people in the most need?  The answer is the cost of filing for bankruptcy has risen significantly in recent years due to the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act.  The law tacked on extra requirements to the filing process, including additional paperwork and consumer credit counseling and debtor education, many of which cost debtors.

The numerous fees involved in filing bankruptcy are making it tougher for lower-income individuals to take advantage of Cook County bankruptcy.  For example, it costs about $300 to file bankruptcy paperwork in federal court.  In addition, there are fees for the mandatory pre-bankruptcy credit counseling and a pre-discharge debtor education course, which cost about $85 altogether.  The higher fees correspond with the additional paperwork that is now necessary due to the changes in the law.  Bankruptcy cases can be complicated, and the changes make it even more crucial to consult a competent professional. 

According to CNN Money, the rising cost of bankruptcy filing will cause between approximately 200,000 and 1 million consumers to be unable to afford to file this year.  The National Bureau of Economic Research found that the bankruptcy rate has fallen slightly since the Bankruptcy Abuse Prevention and Consumer Protection Act took effect, but the average income of bankruptcy filers has increased.  Thus, consumers who are better off or middle class are more likely to be able to file, rather than lower-income debtors who may need it the most.

The attorneys at the Emerson Law Firm frequently handle Chapter 7 bankruptcy proceedings.  Chapter 7 bankruptcy is the most common form of consumer bankruptcy.  It allows consumers to consolidate student loans, protect loan co-signers, or eliminate credit card debt.  However, not all debt is dischargeable through bankruptcy, so it is important to consult a professional before you file.  For instance, student loan debt is not currently dischargeable, though the issue is being hotly debated.  There are also tax consequences related to filing for bankruptcy, so those most be carefully considered as well.  Our Oak Park bankruptcy lawyers have handled many bankruptcy proceedings and know how to successfully navigate the legal system.  For example, bankruptcy lawyers know you can request to have the $300 court fee waived if you are filing for Chapter 7 bankruptcy.  To be eligible, you must meet certain income and financial requirements, however, so, again, it is important to discuss your bankruptcy case with a qualified professional.

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