Higher Bankrupt Costs Since the New Law, So How Can Debtors Get Cheap Affordable Bankruptcy Without Lawyers?
WHY THE NEW BANKRUPTCY LAW WAS ENACTED
On October 18, 2005, the new bankruptcy law, called the “Bankruptcy Abuse Prevention and Consumer Prevention Act of 2005” (BAPCPA), went into effect in the United States. At that time, there was no anticipation that a rising higher bankruptcy costs would sooner result with the new law. However, recent reports find that the new law brought such results, and that there are more American debtors going bankruptcy without lawyers.
The new law had been prompted principally by the general clamor and intense outcry and lobbying of the well-financed, well-organized, and properly connected but powerful, American banking and credit card industries and the bankruptcy lawyers, who had contended that the old bankruptcy law was supposedly “too soft on debtors,” and that the “excessive generosity” of the old bankruptcy system supposedly encouraged abuse and allowed many undeserving debtors who, they said, could well have afforded to pay their debts, to take undue advantage by using Chapter 7 bankruptcy to avoid repaying their debts.
That claim was NOT at all true. In deed, almost every credible study that had been conducted on the subject, and most experts that testified before Congress, had held otherwise. However, Congress disregarded such evidence. In stead, it promptly responded by passing the BAPCPA law, any way.
In consequence, the stated and yet unmistakable purpose of this law was essentially to discourage debtors from filing bankruptcy by making it more stringent and expensive to file. The new law was to do that by forcing people who, it was said, could actually “afford” (through a determination by a complex “means test” calculation) to repay some of their debts, into filing for bankruptcy under Chapter 13, instead of under Chapter 7 – that is, the type of bankruptcy (Chapter 13) which requires that the debtor will repay at least some, if not most or all, of their debts.
HAS THE NEW LAW ATTAINED ITS ORIGINAL OBJECTIVE?
But lo and behold, today, it is now some 5 years later into the new bankruptcy law. The actual results and effects of the new law are just beginning to emerge. And the question is: has the BAPCPA law actually attained the basic objective for which it had supposedly been originally designed?
Actually, on one major goal of the law – the goal of discouraging debtors from filing bankruptcy and drastically curtailing the rise in bankruptcy filings by debtors – the BAPCPA law has, to date, turned out to be a woeful failure. In deed, as we speak today, there is a NEAR RECORD RISE IN BANKRUPTCY FILING. For example, in the 12-month period ending June 30, 2010, bankruptcy filings rose 20 percent, according to statistics released by the Administrative Office of the U.S. Courts. A total of 1,572,597 bankruptcy cases were filed nationwide in that period, compared to 1,306,315 bankruptcy cases filed in the previous 12-month period ending June 30, 2009, making it the highest number of filings for any period since the BAPCPA law went into effect in October 2005.
How the New Law Has Made Bankruptcy More Cumbersome and Costly for Debtors
It is, however, on the second major consequence caused by the law, that its impact has become far more profound for the average debtor or bankruptcy filer. Namely, on the fact that the new law has made bankruptcy far more cumbersome for the debtors, and has simply brought rising higher bankruptcy costs, causing debtors to seek cheap affordable bankruptcy without lawyer.
Historically, the ability of the average debtor reasonably to file for bankruptcy and to be reasonably discharged of his/her debt burden, and to obtain a fresh start to begin life anew relatively unhindered by the past debts, has been a fundamental but vital and long-standing part of the American law and life. In deed, that right is one of a handful of fundamental rights specifically named by the original U.S. Constitution and guaranteed under it. However, contrary to that fundamental American value, the new bankruptcy law of 2005 introduces into the bankruptcy system, perhaps for the first time ever, elements which drastically limit the extent of the exercise and enjoyment of this basic right by the average debtor. It does this by placing an array of new hurdles, financial as well as legal, on the path of the overburdened American debtor who seeks the “fresh start” protection that bankruptcy has traditionally offered the American debtor.
Some Examples of How the New Law Has Done this.
The new law:
• Now makes it harder for debtors to discharge certain types of debts.
• Forces a greater proportion of debtors to repay their debts.
• Imposes special responsibilities and restrictions uncommon even on bankruptcy lawyers and Bankruptcy Paper Preparers (e.g., lawyers are now required to personally vouch for the accuracy of the debt and financial information their debtor clients provide them, and to do more paperwork ), handing lawyers an excuse to jack up their fees for bankruptcy even higher than before.
• Imposes tremendous restrictions and undue scrutiny upon the Bankruptcy Paper Preparers (the name given by the Bankruptcy Code for non-lawyers who help debtors with their bankruptcy paperwork), the net result of which has now 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.
• Require debtors to undergo credit and budget counseling, and
• Subject 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 the Biggest
Consequence of the New Law
Today, some 5 years after the operation of the new BAPCPA law, it is almost crystal clear now that the biggest consequences of these new array of hurdles brought about by the new law on the American debtor, is that there has been rising higher bankruptcy costs with the new law and an exorbitant lawyers’ fees for bankruptcy filers, and which has caused the debtor to seek cheap affordable bankruptcy without lawyer
Bankrupt Cost Higher
For example, according to a study released in January 2010 by Katherine Porter, associate professor of law at the University of Iowa, and her colleague, Ronald Mann, a professor of law at Columbia University, titled “Save on Bankruptcy fees,” (primarily because attorney fees and court filing fees have risen so dramatically under the new law) most debtors in current times simply find it too expensive to file for bankruptcy. For example, the average lawyers’ fee for a simple bankruptcy in parts of the country today, has reportedly 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.
But Don’t Despair. There are Still Some Available Low-cost, Affordable Options for Debtors to File Bankruptcy!
Now, true, for many a debtor the new law has brought rising higher bankrupt costs. But, as a debtor wanting to file bankruptcy, how do you remedy this major hurdle? That may mean, for example, how do you get cheap affordable bankruptcy without lawyers? Actually, one answer seems to be that the American debtors and consumers have become increasingly adept at finding a “new” alternative for getting their bankruptcy filing needs done – AFFORDABLY.
One such major legitimate option and excellent alternative open to debtors under the U.S. Bankruptcy law, and which is now becoming increasingly “popular” among them as their way to file bankruptcy, is the use by debtors of low-cost, cheap, non-lawyer helpers to assist the bankruptcy filers with their bankruptcy paperwork. Called Bankruptcy Paper Preparers or BPP under the bankruptcy law, these helpers are often skilled paralegals. The better ones among them, when correctly selected, are specially trained and experienced specialists in the bankruptcy process, often exactly the same paralegals that bankruptcy lawyers employ in their own offices in doing the bankruptcy work for their debtor clients.
Stephen Elias, a California attorney and bankruptcy specialist and author of several books on the subject, summed up this fact and trend this way: “Surveys have shown that many attorneys have doubled their fees to cope with new requirements imposed by the BAPCPA of 2005. Many thousands of debtors have therefore been priced out of lawyer representation in their bankruptcies.”
Hence, adds Elias: “Because of rules governing the practice of law, the only legal alternative to attorney representation is self representation… Bankruptcy Petition Preparers can assist with your paperwork.”