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According ot the lawyers surveyed, the result of this legislation has been a disaster. Only some 3% of all filers have shown eligibility through the means test of being able to repay their debts through a debt management plan. This shoots holes in the theory that most filers are just gamblers and compulsive shoppers. The vast majority of filers are people who have simply had a streak of bad luck. Nearly 80% of filers had debt problems due to loss of job or a medical emergency, which has traditionally been the most common reason for filing. The remainder consisted of people who fell into debt problems due to their own lack of money management skills.
Unfortunately, all of these people are subject to the provisions of the new law, and that has led to other problems:
- Lawyer troubles - Attorneys are backed up, so much so that many of them have stopped accepting clients. Those that still are accepting clients have raised their rates considerably in order to offset the additional liability thrust upon them by the new law.
- Credit counseling problems - Some agencies are in trouble with the Federal government for falsely claiming to be nonprofit. Others are falsely claiming to be approved for pre-bankruptcy counseling. Others are simply deluged with a large influx of business which the Federally mandated $50 per customer fee doesn’t even begin to cover.
- Backed up courts - Hundreds of thousands of people filed for bankruptcy in the weeks leading up to the changes in the law. This has led to a huge backlog in court cases, some of which could stretch for years.
So far, it does not appear that the new law is having the intended effect. When the law was passed, it was thought that many, if not most, filers would end up repaying debts, rather than filing for relief through the courts. Instead, that number of people, a mere 3%, hardly seems large enough to have justified passing the legislation in the first place.
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