Debt relief may become more expensive than ever

Filing for bankruptcy has never been easy. It involves lawyers, courts, fees and time. As a rule, bankruptcy has always been, and should be, a last resort for people who have financial problems that are beyond their control. Most filers are people who have lost jobs, had accidents, or encountered medical problems that led to bills that they simply could not afford to pay. Bankruptcy has long provided an opportunity for such people to get their lives back together by allowing the courts to wipe out their debts in order to let them start over. There’s a price for that - a mark on their credit report that lasts for a decade, making it harder than ever to get a good interest rate on a car or home loan.

Congress decided in 2005 that it was too easy to have debts wiped out, so they passed some legislation designed to make it harder. The new laws made it more difficult to file and increased the filers’ dependence on attorneys. The legal profession was swamped, and they increased their fees in order to account for the extra work involved and the extra liability that the new law imposes upon them. These added fees haven’t done any favors for people who already have too little money.

What was a bad situation is now likely to get worse. Proposed legislation before Congress suggests raising the fees for a Chapter 7 personal bankruptcy filing to nearly $450. This will be the fourth time in the last year and a half that the fees have been raised. In fact, raising the fees to the proposed level will cause them to have more than doubled since early last year. Why the increase?

The increase is coming at the request of the National Association of Bankruptcy Trustees, the group that oversees and administers bankruptcies for the court system. It will, no doubt, be passed by Congress, which still has a tendency to view those who file for debt relief as people who simply don’t want to pay their bills. Studies have shown that this couldn’t be further from the truth, but the stories persist, and Congress always seems more interested in listening to the lobbyists from the credit card companies than they are in looking out for the best interests of their poor constituents.

In order to offset the increases, the National Association of Consumer Bankruptcy Attorneys is urging their members to offer free initial consultations with those consumers who are considering filing for debt relief. It is doubtful that this will help much, as many bankruptcy attorneys offer free initial consultations already.

In all likelihood, this increase won’t matter much. Most filers have debts in tens or hundreds of thousands of dollars. A couple of hundred dollars in increased fees probably won’t make much difference. People who need to file will somehow find the money to do it.

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