With the trend towards rapidly rising filings in bankruptcy
becoming the norm once again in today’s dire American economic and
unemployment climate, a growing number of consumers are increasingly
seeking cheap, low cost affordable bankruptcy, usually meaning without
the lawyer. They seek nonlawyer system of bankruptcy filing that provide
them affordable, cost-effective bankruptcy, while yielding them the
same end result as would using a high cost bankruptcy lawyer – having in
hand the bankruptcy court document that shows you’re officially
declared a BANKRUPT.
THE NEW REFORMED LAW: ITS BASIC MISSIONS & OBJECTIVES
On
October 17 2005, amidst highly charged tense drama, robust promises and
high expectations, the new “reformed” bankruptcy law enacted by
Congress, the 2005 Bankruptcy Abuse and Consumer Protection Act or
BAPCPA, went into effect. Largely enacted at the instigation principally
of the powerful, well-financed credit and financial industries, among
other special interests, the law had been touted as something of a
bankruptcy cure-all that was going to fix a “broken” bankruptcy system
in America. Principally, it was going to reverse, or at least
drastically reduce, the high volume of bankruptcy filings and the
increased use of bankruptcy by American consumers in resolving their
debt problem. The overarching argument and premise expressed by the
banking and financial industry advocates and supporters of the reform
law in urging the law’s enactment, had been that the steady upward trend
at the time in bankruptcy filings was due primarily to “fraudulent
bankruptcy filings” by consumers and the “excessive generosity” of the
old bankruptcy system which, it was said, encouraged “abuse” and allowed
a great many number of debtors to repudiate debts that they could quite
well pay, at least in part. Ironically, almost in the entire debate
about the enactment of the 2005 law, virtually no mention or discussion
was made concerning the debtors’ being able to find, or to afford or to
get, low cost or cheap bankruptcy filing, either with bankruptcy lawyers
or without it.
The stated and yet unmistakable mechanism by which
the new 2005 law was to pursue this primary objective of the new law,
was essentially to force debtors who could supposedly afford to repay
some of their debts, into filing for Chapter 13 bankruptcy, in stead of
Chapter 7. That is, filing the type of bankruptcy (Chapter 13) that
requires one to repay his debt, or at least some of it. Briefly summed
up, primarily by restricting access to eligibility for Chapter 7 – as
primarily determined through the so-called “means test” calculation on a
debtor’s income – the new law was to drastically weed out and curtail
the number of debtors filing for bankruptcy.
Alright, today it is
now going to 4 years since the BAPCPA law was put into effect, and has
it attained its sponsors’ stated mission? And if so, to what extent so
far?
In point of fact, for the first few years after the
implementation of the law in October 2005, the original objective of
that law at least in the area of drastically curtailing the number of
bankruptcy filings, actually seemed not only to have been attained, but
to have in fact been dramatically surpassed. Almost immediately after
the law came into effect, there was a blunt, vivid dramatic drop seen in
the number of bankruptcies filed in the system in the years immediately
following the law – the filings went from 1,597,462 in 2004 (the last
normal year of filings before the new law was enacted), to a mere
590,544 in 2006, and only 826,665 in 2007. No bankruptcy filings that
were low cost or affordable to debtors, were largely available in this
earlier post-2005 law, however, since most filers at the time were
largely intimidated by the lawyers’ common talk about the supposed
“complexity” of the new law, and simply used only the lawyers to do
their bankruptcy almost exclusively.
Thus, clearly, a direct
effect of the new law, at least in the immediate aftermath of the law,
was that it did in fact definitely push, as intended, a great number of
debtors out of the Chapter 7 option range altogether, forcing them
exclusively into the Chapter 13 option in which they find themselves
forced to pay at least some of their debts, thus substantially
increasing the proportion of debtors who paid up some of their debts.
For example, in years prior to the new 2005 law, Chapter 7 bankruptcy
filings accounted for roughly 70% of all non-business or consumer
bankruptcies (it was precisely 71.5% in 2004, the last year before 2005
when the new law took effect), while Chapter 13 bankruptcies accounted
for approximately 30% or less. The post-2005 year bankruptcy filings for
the earlier years after the 2005 law, showed, however, a marked
increase in the number of bankruptcies filed under Chapter 13, to the
extent of some additional 10%,. Thus, for example, the number of Chapter
13 bankruptcies filed in the 12-month period ending December 2007
(321,359), represented, not the usual 30%, but 39.1% of the total
consumer filings for that year.
The situation described so far was
what obtained with respect to the EARLIER period of the time after the
new 2005 law came into effect. But now, fast forward to the LATER
period, however – to today, in July 2009. And what we find is that the
American debtors, once again, are fast returning to the same high rate
of bankruptcy filings as the pre-2005 levels. In deed, informed expert
projections are now that we’ll land right back pretty soon at the same
old “square one” heights in bankruptcy filing – back to the old “bad”
high pre-2005 bankruptcy filing levels which the 2005 “reform” law just
enactment by Congress had been meant to cure and reverse.
According
to data from the Automated Access to Court Electronic Records
(“AACER”), there were over 120,000 U.S. bankruptcy filings in May 2009
or 6,020 for each of the 20 business days in May, marking the first time
that daily bankruptcy filings have topped the 6,000 mark since the 2005
bankruptcy law was adopted. According to one widely respected expert at
bankruptcy filing figure crunching, Professor Robert Lawless of
the University of Illinois School of Law whose calculations place the
average daily filing rate for 2004 (6,339) as the “benchmark” for the
pre-2005 filing rate, what America is currently seeing is a filing trend
which is already hitting the high pre-2005 mark, and right now the
long-term trend is directly towards the same filing rate as before the
2005 bankruptcy law was adopted.
Thus, the returns from the May filings on an
annualized basis, keep us on track for a projected filing of 1.45 – 1.50
million bankruptcies this 2009, depending on how closely the current
trend adheres to, or deviates from, the bankruptcy filing trend for the
remaining part of the year.
THE 2005 LAW HAS FAILED ON TWO
FUNDAMENTAL COUNTS: FAILS TO STEM THE GROWTH IN BANKRUPTCY FILING RATE
& IN KEEPING BANKRUPTCY AFFORDABLE
Clearly, then, the
“reformed” 2005 BAPCPA law has woefully failed in its FIRST avowed
fundamental objective of drastically curtailing the upward trend in
bankruptcy filings by the American debtors. But, in addition to that,
there is another very important way, in deed even a more profound way,
in which that law has woefully failed for the American debtor: it has
made the bankruptcy system far more difficult and cumbersome, and far
more expensive and even unaffordable for debtors. For example, among the primary anti-debtor provisions of this new law, this current law:!
== now makes it harder for debtors to discharge certain types of debts
== now forces a greater proportion of debtors to repay their debts
==
now imposes special responsibilities and restrictions that are
uncommon, even upon bankruptcy lawyers and bankruptcy document preparers
(e.g., lawyers are now required to personally vouch for the accuracy of
the debt and financial information their clients providing, and to do
more unnecessary paperwork) thereby giving the lawyers more excuses for
jacking up their fees for bankruptcy even higher
o now imposes tremendous restrictions and undue scrutiny upon the Bankruptcy Petition Preparers
(the name given by the Bankruptcy Code for nonlawyers who help debtors with their
bankruptcy paperwork, as generally far lower costs), the net result
of which has been to discourage affordable assistance for bankruptcy
filers and thus chase them into the offices of bankruptcy lawyers who
charge some 50 times the fee of the BPPS to do basically the same thing
for the debtor
o now imposes a new requirement (and additional expense) which requires debtors to undergo credit and budget counseling, and
o
subjects bankruptcy filers to a mountain of paperwork, documentation
and procedures that could be quite daunting for anyone in order to file
for bankruptcy.
EXORBITANT LAWYERS’ FEES FOR BANKRUPTCY FILERS AS THE BIGGEST ANTI-DEBTOR CONSEQUENCE OF THE NEW LAW!
But
perhaps the biggest anti-debtor consequence brought about by the new
law – the consequence which, by most expert opinion, is precisely what
had been intended by the banking and credit industries which were
principal sponsors of the new law – is that by introducing far more
paperwork and unnecessary extra complexity and protocols in the way the
bankruptcy process is undertaken, it has enabled the lawyers’ to find an
excuse by which they have been able to jack up and to justify the fees
and the costs of filing for bankruptcy. Consequently, the costs of
filing for bankruptcy since after the 2005 law, have become
prohibitively high, in deed unaffordable, for the average bankruptcy
filer. The average lawyers’ fee for a simple bankruptcy in parts of the
country today, has shut up to a whopping sum of $2,500 for a simple
Chapter 7 bankruptcy, and about $4,500 for a Chapter 13, among other new
complications now to be confronted by the debtor who wishes to file for
bankruptcy. For many debtors, this therefore leaves the low-cost
nonlawyer bankruptcy method, as the ONLY real remaining, practical, but
affordable and effective alternative to the use of lawyers for their
bankruptcy.
But Don’t Despair. There are Still Some Open Avenues of Cheap, Low Cost Affordable Bankruptcy Remedy For Debtors!
Here’s the good news, though.
True, filing for bankruptcy under the new 2005 law has become
considerably more cumbersome and certainly more expensive as compared to
what had been the case previously. Nevertheless, however, even under
the new law, filing for bankruptcy, especially Chapter 7, is still a
fairly straightforward process for a large number of filers. This is so
more especially when you (the debtor) do it using basically one unique
alternative system to traditional use of lawyers in bankruptcy – namely,
using a nonlawyer, self help system, or one which uses a competent
reliable Debt Relief Agency or Full Service Bankruptcy Document
Preparer, in doing your bankruptcy paperwork. This kind of service,
which utilizes skilled persons possessed of great skill and competence
in the process to prepare the required bankruptcy papers for a debtor
for a mere fraction of the lawyer’s fees, could often be one of the
wisest, most cost-effective and yet simple alternative in getting one’s
bankruptcy done.
For more on the methods for obtaining a cheap, or
low cost, affordable bankruptcy but with high level quality and
reliability, or of finding some of the oldest and most reliable agencies
that specialize in providing such service and objective, visit: http://www.afford-bankruptcy.com