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.