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Thursday, July 31, 2008

Courts - "Filing for Bankruptcy Becomes More Costly"

Jacquelllline Palank of the WSJ reports today:

Individuals who have filed for bankruptcy protection since Congress overhauled U.S. bankruptcy laws in 2005 have faced a more expensive process as attorneys' fees have risen by roughly half, according to a government report.

In a report issued Monday, the U.S. Government Accountability Office said attorneys' fees for individuals who file for Chapter 7 bankruptcy-court protection increased by 51% since the Bankruptcy Abuse Prevention and Consumer Protection Act took effect in October 2005.

The report attributes the increase to the heavier load of legal work that is necessary to meet the law's requirements, which experts say has created a significant hurdle for financially strapped individuals.

"We've imposed enormous costs on the system which, among other things, have been a real barrier to people filing for bankruptcy because it's so expensive," said Henry Sommer, president of the National Association of Consumer Bankruptcy Attorneys.

According to the report, the average lawyer's fee for a Chapter 7 bankruptcy case -- in which an individual's assets are liquidated and debts are discharged -- climbed to $1,078 in February and March of 2007, compared with $712 for the same period in 2005.

For Chapter 13 bankruptcies, which allow individuals to develop creditor-repayment plans, the median attorney's fee rose to $3,000 in February 2008 from $2,000 just before the law was passed.

Not only do individuals face higher attorneys' fees, but the accountability office also said that the fees to file for bankruptcy rose by $90, to $299, for Chapter 7 filers and by $80, to $274, for Chapter 13 filers.

Here is a link to the 53-page June 2008 report.

Posted by Marcia Oddi on July 31, 2008 11:07 AM
Posted to Courts in general