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Sunday, November 3, 2013

Can Debtors Afford Bankruptcy? Finding Low-Cost Bankruptcy

There seems palpably in the air, one ominous additional burden for the average heavily indebted American debtor and consumer in today's dire national economic conditions who may perhaps see his only recourse for some relief, in filing bankruptcy: finding low-cost bankruptcy, finding low-cost bankruptcy that you can afford. Meaning, in essence, a non-lawyer pro se alternative.

The latest figures just released by the Administrative Office of the U.S. Bankruptcy Courts on the February 2009 bankruptcy filings, made one vital reality crystal clear to almost every one, namely, that the rate at which the increasingly overburdened and restive American debtors (both individuals and businesses) are filing for bankruptcy, is at its highest levels since the now-famous (or infamous, many would say!) draconian changes of 2005 to the U.S. bankruptcy law. But, even more significantly, that the new filing rate is ominously beginning to return to the old "hated" high bankruptcy filing levels that the nation had reached before that new law was passed in 2005, supposedly meant to correct and drastically curtail or reverse the then pre-existing high filing levels.

This latest trend in American debtor bankruptcy filings strongly underscores a few fundamental points, among others. First, the depth and gravity of the financial straights and difficulties in which the average American consumer and debtor is in today. Second, the reality that, no matter how difficult a legal hurdle and impediment the institutional powers that be (the Congress, the lawyers, or the financial institutions, the courts, etc) may try to place on the path of the American debtors to try discouraging or making it more difficult for them in seeking the bankruptcy relief from their debt burdens, when it really comes time of dire financial and economic crunch, Americans will somehow still find a way, and will still persevere and persist even against all odds, in demanding their constitutional rights to be heard in bankruptcy; and thirdly, the critical necessity, for the average debtor, for finding low-cost bankruptcy filing alternatives to lawyer.

Elizabeth Warren, a Harvard Law School professor and author of several books on bankruptcy, probably sums up the point best this way, alluding to the persuasion of the Congress by various special interests to pass the 2005 law that restricted debtors from filing for bankruptcy: "The credit industry [and other vested interests] did its best to drive up the cost of filing [for bankruptcy]. But when families are in enough trouble, they will fight their way through the paper ticket and higher attorneys' fees to get help," adding that "The word is now leaking out [once again] that the bankruptcy courts are open for business."

THE "UNOFFICIALLY BANKRUPT DEBTORS" - DEBTORS WHO CAN'T FILE BECAUSE THEY CAN'T AFFORD IT

But, even most importantly than that, from the standpoint of the average bankruptcy-seeker today, this raises one fundamental questions, however. Namely, just how do the current growing army of increasingly despairing American debtors who not only seek to file for personal or business bankruptcy, but in a great deal of cases, truly NEED to file one, AFFORD to file bankruptcy - in particular, the high lawyers' legal cost of filing for bankruptcy? How do these debtors get or find low-cost bankruptcy? A bankruptcy that debtors can reasonably afford?

Some 1.1 million (1,064,000) American debtors filed for bankruptcy this past 2008 year - filings which, many analysts are quick to remind us, were carried out by these debtors in spite of, and under tough conditions of, a whole host of stringent, restrictive requirements and drastically increased legal fees imposed by the 2005 law. But, even more significant, from the stand point of the debtor or bankruptcy-seeker, is another closely related FACT: that, worse still, according to experts, THERE'S NEARLY AS MANY AMERICAN DEBTORS MORE who wanted to file for bankruptcy and are eligible, but could not, because they simply couldn't AFFORD the lawyers' legal fees. These are debtors who Justin Harelik, a bankruptcy lawyer with Price Law in Los Angeles, call the "unofficially bankrupt debtors" - debtors who are all but bankrupt but only lack the lawyers' hefty price to make their status official!

YEARLY NUMBER OF BANKRUPTCY FILINGS SINCE 1998
Source: creditslips.org

Year.......Bankruptcy....... Filings......... Source & Notes
1998.......1,442543..........AO data......(Office of U.S. Courts)
1999.......1,319,465.........AO data
2000.......1,253.444.........A.O data
2001.......1,492-129.........AO data
2002.......1,577,561........AO data
2003.......1,589,383.........AO data
2004.......1,597,462.........AO data
2005.......2,078,415.........AO data........includes spike in filings before 2005 bkr. law
2006.......590,544...........AACER data...(Automated Access to Court Records)
2007.......826,665...........AA.CER data
2008.......1,064,000.........AACER data

EVEN THE LAWYERS AGREE, THEIR BIG FEES IS A PROBLEM WITH DEBTORS

In deed, though many bankruptcy lawyers would rather that it be sugar-coated, many other lawyers, themselves, objectively acknowledge that the lawyers' legal fees for bankruptcy is a principal frequent issue and concern to debtors and clients in bankruptcy law practice.

"You have to pay the Chapter 7 legal fees upfront in cash. You can be too poor to go bankrupt," is how Professor Robert M. Lawless of the University of Illinois College of Law once put it.

Another observer, Jenny C. McCune, a contributing editor at Bankrate.com, notes that rather astoundingly, we've now come to the point where a debtor may have to "finance bankruptcy filing," adds: "It may sound like a Catch-22...you have no money so you're filing for bankruptcy, but you need [legal fee] money so you can file for bankruptcy."

Jonathan Ginsburg, bankruptcy attorney, Atlanta, Ga., explains that in phone conversations he often has with callers facing severe financial crises who are pondering possible bankruptcy, after their initial question which is often general in nature, "The next question I get has to do with fees: 'If I have no money, how am I supposed to pay for a lawyer?'"

LAWYERS TRADITIONAL ARGUMENT FOR THEIR HIGH FEES

Bankruptcy lawyers, schooled in the art of argumentation and the defense of even the clearly indefensible, particularly when it centers on the protection of a lucrative means of making a living, would often plunge into what, in essence, are really deep philosophical arguments in justification of the high fees they charge - it is really still a "bargain" for debtors, considering the much larger sums they stand to discharge in bankruptcy; if a debtor is "really" hard pressed enough by his debt burden and is "serious" about freeing himself of it, he'll somehow find a way; a debtor, if he is really "serious," can always find the lawyer's fees somewhere by, say, withholding the payments he would have had to make to other creditors and then using it to pay the lawyer to free him of the bigger debt burden, etc., etc. It is a complex web of arguments that would have to wait for another day to address. But, for our current immediate purposes in this article, the relevant issue is crystal clear. The point, clearly, is that for the average American debtor today, already reeling from the high debt burden which is the prime object he's out attempting to address through bankruptcy filing, the average lawyer's fee for bankruptcy (some $2,000 or more for the simplest Chapter 7 bankruptcy, and $4,500+ for its Chapter 13 counterpart) is high, in deed even exorbitant, and frequently is just plain beyond his means - in short, simply UNAFFORDABLE.

LAWYERS' FEES HAVE "PRICED OUT" A LOT OF DEBTORS

Seems that the bankruptcy lawyers, through greed and monopolistic instinct, are gradually pricing themselves out of the personal bankruptcy filing business, that the only realistic alternative now left to be tried, seems to be a non-lawyer low-cost bankruptcy option.

"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," asserts Stephen Elias, a California attorney and bankruptcy specialist and author of several books on the subject. "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."

The point then is crystal clear. The fundamental task at hand this very minute in the field of bankruptcy, is devising a credible system that is low-cost for filing bankruptcy, which is simple, straightforward, and readily accessible, and is, above all, AFFORDABLE to most debtors who legitimately seek or need bankruptcy and are qualified and eligible to file under the eligibility rules. It is, after all, no "gift" or some kind of "favor" being meted out by "the law," or some kind of mercy-peddling do-gooders of the legal establishment. But, a direct sacred right and gift of the American Constitution.

It is a task which confronts us all, particularly the bankruptcy constituency and the bankruptcy industry powers-that-be who control the current bankruptcy system - the financial and credit industry, the courts, the Congress, but including private entrepreneurs and ideas persons who can come up with new or fresh ideas about how to fix the current broken personal bankruptcy system, and yes, the current bankruptcy lawyers and bar, and others.

But, of more immediacy and urgency in the mean time, however, while we await such a new system to be designed by the responsible parties, qualified American entrepreneurs, institutions and entities who are able, should be free to come up with practical and effective ways and methods - alternatives to the current wholly deficient and inadequate lawyer-controlled bankruptcy system - that actually enable legitimate bankruptcy seekers to exercise their legitimate constitutional right to seek the bankruptcy relief option when and if necessary - simply and AFFORDABLY.

How Bankruptcy Works by State

Numbers of local consumers newly uncomfortable with their accumulated debt loads are beginning to worry over the economic problems affecting Colorado and the nation as a whole. These consumers tend to flock toward bankruptcy attorneys to see whether or not Chapter 7 or Chapter 13 bankruptcy protection would better their situation, and, after the changes to the bankruptcy code following the 2005 legislation, whether or not they would even qualify for Chapter 7 debt elimination bankruptcy in their state of residence. While virtually all the citizens of Coloradan that we have spoken with maintain some knowledge of bankruptcy processes - after all, growing up in the United States of America, even children recognize that bankruptcy is meant to offer a fresh start to debtors who have gotten in over their head with bills they're unable to pay - most ordinary consumers are unaware of the actual specifics regarding bankruptcy declaration and eventual discharge.

While we can't pretend that the totality of knowledge floating about the potential repercussions and intrinsic loopholes of bankruptcy should be able to be glossed over in an article such as this, there is information every Coloradan debtor should be aware of before taking another step. It seems, from our correspondence, that almost no Coloradan not already working in the financial services industry has more than a cursory understanding of how their local statutes will protect their assets in the event that they do decide to go through with bankruptcy declaration. For instance, every state holds personal exemptions that borrowers can choose to invoke rather than taking advantage of the (generally far harsher) federal exemptions, and these may change greatly depending on the borrowers' location around the country. Any consumer seriously interested in bankruptcy should first do their own research on how bankruptcy (and, especially, bankruptcy in Colorado) could help their own financial scenario before paying the ever more expensive costs that comes along from even a consultation with experienced bankruptcy attorney firms. These lawyers charge by the hour, after all, and there is no reason to ask questions that could be easily answered for free should the borrowers have sufficient interest.

Once again, virtually everyone your authors have spoken with in Colorado knows the most basic information about bankruptcy protection - consumers with sufficient debt balances (provided they're the right sort of unsecured loans) will be considered for a Chapter 7 debt elimination program (provided they have not earned too much money in the preceding years) that could liquidate their credit card bills and similar burdens under the full protection of federal and Colorado state law. The bankruptcy process was originally legislated to offer a new hope for borrowers that have bitten off more than they could chew. To a large degree, for debtors sufficiently desperate and who have suffered genuine calamities necessitating governmental assistance, this can still be true, but, sadly, only a minority of people living in Colorado would actually qualify under current conditions. Fortunately, even as the official protections continue to dissipate, a number of new debt relief and debt management companies have come into existence which attempt to help debtors in Colorado and across the United States erase their more problematic high interest loans and learn proper household budgets and correct spending behaviors to preclude a return to similar situations. Since the discrepancies between debt consolidation and debt settlement and Consumer Credit Counseling are significant and each solution may be different for different sorts of Coloradan families, it should certainly be a priority for every borrower to learn all that they can about these debt maneuvers prior to helplessly concluding that bankruptcy would be the only solution available.

To be sure, however difficult it may now be for Colorado borrowers to avail themselves of bankruptcy protection, it is nonetheless a federally sanctioned legal right to at least file a petition declaring your intentions, and the very act of bankruptcy declaration prevents your accounts from debtor harassment or attempts at collection. Once any borrower files for Chapter 7 or Chapter 13 bankruptcy protection in the state of Colorado, the various lenders - and whichever bill collectors the lenders may have been working with - are legally required to end all forms of communication. Unless the lenders can prove that they will lose money by waiting for the trustee chosen by the Colorado courts to render a judgment on the borrowers eligibility for bankruptcy through depreciation of collateral or other means (this rarely happen), the filer should at the least be granted a sudden peace of mind just after declaration. This does not, of course, guarantee the Coloradan borrower shall qualify for bankruptcy nor that the Chapter 7 debt elimination proceedings would be advantageous once all the drawbacks were taken into consideration. Like virtually all elements of consumer finance, no strategies should be entered into blindly or chosen without time for reflection and sufficient amounts of research and self education that would allow all due deliberation. In this article, we would primarily like to go over the reasons each Colorado borrower may invoke when first thinking about bankruptcy, the various processes and statutes borrowers should be aware of before filing (as well as those alterations and exemptions specific to Colorado), and the other debt relief techniques that have become popular in recent years.

When deciding on the necessity of bankruptcy, there are a few different aspects each Coloradan should consider fully before making a final decision - or, again, even spending dollar one on a discussion with the bankruptcy lawyer they would consider using. If the interest rates on any given loan are sufficiently high so that the borrowers cannot satisfy much more than the minimum payments each month, Chapter 7 or Chapter 13 protection should certainly have to be thought of as an option. In the same way - this almost always goes alongside the previous problem, as a matter of fact - borrowers whose collected unsecured debts have amassed to a degree that they would be virtually impossible to repay over the near future may genuinely need look into bankruptcy or any other debt solution available in Colorado. Further, as you should imagine, the regular threatening phone calls and mailings from lenders or collection agents working on their behalf should be a strong warning signal that something has to be done. Remember, as soon as you start working with a debt management firm or file a bankruptcy petition, Colorado state law guarantees that all collector harassment shall immediately cease. In the event that secured lenders have begun the proceedings to enact foreclosure of personal residences or the repossession of automobiles (or, even, the much less common but still effective civil court summons for potential forfeiture of property), you'll have little choice other than to employ an attorney or debt professional to aid you with your financial burdens.

Essentially, Colorado borrowers must sit down with their families and struggle through the question of whether or not they can justifiably expect to pay back their worst bills (those debts either featuring high interest rates or adjustable interest rates bound to escalate plus loans which demand balloon payments or risk default) in a reasonable amount of time. What do your debts look like compared to the family financial situation of one year ago? Have they become progressively worse? Clearly, demonstrable headway that has been made in paying loans down should be seen as a sign that successive attempts at personal debt management may be enough to eliminate the majority of your problems while, in the same way, ever increasing debts are a reason to investigate bankruptcy or seek out professional assistance from your area of Colorado. Do you have any reason to believe that your income will greatly increase over the short term? Have you considered the overall financial free fall otherwise seen by most aspects of the Coloradan economy and the status of the American economy as a whole? If your motivation for believing the resolution of all debts shall come from some preyed upon inheritance or similar windfall, we strenuously counsel suspicion and a clear headed maintenance of resolve. You have no idea how many Colorado citizens we have corresponded with who let their debts fester while vainly waiting on a miracle only to end up declaring bankruptcy after their credit rating had been unnecessarily ruined (even worse than if they had gone bankrupt in the first place) and family morale irreparably harmed.

It's easy enough to recognize your problems when you have bill collectors breathing down your neck and even the minimum payments seem beyond hope of remuneration. Once consumers realize that they can't depend on their own incomes to better their own situation - no matter the attempts at controlling spending and hewing to a budget - it's a simple step toward bankruptcy. However, for those Colorado borrowers who have not yet reached rock bottom, who still think they may be able to climb out of debt burdens on their own, it may be surprisingly difficult for consumers untutored in the complexities of finance to understand just how potentially dire their debt circumstances may be. Any Coloradan resident with unsecured debt obligations in the amount of ten thousand dollars or greater needs to give serious thought to employ some debt solution program, but, still and all, this is still not necessarily the time for bankruptcy. For this reason, your authors advise using one of the debt calculators online to attempt some more accurate estimation of your payment time lines and how much you would end up paying in compound interest over the duration of your various debts. Even then, if you still have trouble with the math (and credit card companies have little reason to simplify this process), you may wish to talk with one of the debt management or debt settlement companies that offer free consultations to see what they would suggest.

Once again, in many situations, these debt relief firms are likely to say that utilizing the bankruptcy protection of federal and Colorado law would be the most beneficial alternative. Successfully undertaken, Chapter 7 bankruptcies could liquidate all applicable revolving debts - credit card accounts primary among them - and your authors understand how very attractive that scenario must seem. Discharged obligations are the cherry on the cake of bankruptcy protection, but there are other benefits above and beyond the potential of dissolution of legal debts much as that aspect garners the headlines. In Colorado, as we have mentioned, merely filing the initial documents for Chapter 7 or Chapter 13 bankruptcy declaration will force all creditors to halt their attempts toward debt collection even if court actions had already been begun to garnish wages or repossess vehicles. Indeed, even those assets recently reclaimed by the collection agency will be (temporarily, depending on the Colorado trustee ruling) returned by the lender following a bankruptcy petition. In the same way, utilities that had been turned off because of faulty payments will be immediately restored, and foreclosure proceedings for residences will be suspended for the time being. For borrowers who believe their mortgage company or other lenders acted in poor faith or had even committed out and out fraud but were unaware of how to alert authorities or afford proper lawyers, this time and avenue toward the courts should alone be worth the bankruptcy proceedings. It's especially difficult to fight multinational corporations when your power has been shut off, and the Colorado justice system will be allowed additional time to study and consider any borrower claims.

At the same point, much as Chapter 7 bankruptcy protection can do grand things for the lucky Colorado consumer, it's certainly not the savior to every borrower. Even if you are accepted into the program, you will find that dollar one of many sorts of debts - for some individuals and families, perhaps even the majority of your debts - will not be affected in any way. Secured debts such as home mortgages and car loans, presuming you wish to maintain the possessions that these debts are attached to, will be essentially left alone although the consumers will be asked to reaffirm these obligations with the original lenders. Student loans, for these purposes, will be considered another sort of secured debt since legislation pushed through congress in the late 1980s ever after disallowed the discharge of all education loans in Colorado and throughout the country. Furthermore, borrowers should not expect any funds that are owed for familial debts like alimony or child support to be done away with, and, for that matter, all debts handed down by the government or courts (from penalties to taxes resulting from criminal misdeeds) of America or Colorado are similarly rendered invulnerable. As another element to consider, should the debts have been co-signed, the other party may be held liable for the entirety of the obligation. Considering the limited debt liquidation available even from successful Chapter 7 bankruptcies, one can't presume the program shall best aid each consumer problem.

More to the point, there is also no guarantee that Chapter 7 protection will even be made available to every Colorado borrower that genuinely seeks an elimination of their burdens. Once a petition is filed for Chapter 7 debt liquidation, the court decides on whether or not the potential for unsecured loan discharge will be deserved. Should the Colorado court trustee decide otherwise, the borrower will be deemed eligible for Chapter 13 bankruptcy debt adjustment program which - while still forcing a temporary stay of collection that may be of sufficient help for truly needy consumers - demands a monthly payment to the trustees which the courts shall then distribute among the assembled lenders. Unlike the Chapter 7 program, even credit card bills will be largely satisfied by the original borrower under Chapter 13 protection, and the courts shall determine a budget (alongside the budgetary guidelines predetermined by the Internal Revenue Service according to their, shall we say, somewhat fantastical expectations about Colorado living expenses) that the household shall have to survive under for the sixty month period of repayment. In this way, aside from the temporary end to bill collector harassment, Chapter 13 will be not much more effective than any personal attempt at debt relief, but the programs legal restrictions could prove far more damaging should the court unfairly decrease your actual expenses or should your household earnings falter during the time of repayment.

There are other forms of bankruptcies, the different Chapter applicable under Colorado law range from those dealing with family farms to actual municipalities, but virtually every borrower shall only have to concern themselves with Chapter 7 or Chapter 13 protections. Really, since the Chapter 13 budgetary guidelines are so strict and the benefits so small, consumers in Colorado should only knowingly enter Chapter 13 when they have a tax obligations that they're otherwise unable to resolve or secured (mortgage, auto loan, investment) loans that are in jeopardy of default but which they believe they should be able to repay given reaffirmed terms. As happens, most every borrower that goes into Chapter 13 protections only does so because the Colorado trustee - following the directives of the 2005 congressional alteration of the US bankruptcy code - finds the individual or couple declaring bankruptcy earns too much money. The recent code changes examine each bankruptcy petition in terms of the filers gross income as compared to the median income of their state of residence. For consumers filing in Colorado, this means that a single borrower must have less than forty two thousand in earnings according to recent census information. A Colorado household with two members would have to earn less than sixty thousand, three members would need less than sixty four thousand, four members would need less than seventy five thousand and so on. Understand, beyond simple tax records of earnings, that the formal stipulation does not allow the Colorado trustee to look at the filers' debts but only their incomes, and borrowers who petition for bankruptcy without properly checking their figures against the median income of Colorado residents could be in for five desperate years.

The legislation of 2005 did more than simply make it more difficult to enter Chapter 7 debt elimination programs, of course. There is so much misinformation swirling around the recent changes that many of the Coloradan citizens we have spoken to are falsely convinced that bankruptcy protection which would liquidate credit card bills no longer even exists. As we have written, presuming borrowers pass the income regulations, Chapter 7 protection could be a salvation for the right filer, but, still and all, further hurdles have been erected. The documentation requested from all debtors upon finishing their petitions - from expense receipts to half a years worth of income evidence - has become far more challenging for ordinary citizens who have little time to go tracking down paperwork. Also, borrowers will be forced to take a credit counseling course before their bankruptcy will first be considered and, again, before their bankruptcy will be discharged. Not only will the interested consumers have to pay the not inconsiderable costs from their own pockets, they may have to travel some ways from their area of Colorado just to find a training course certified by the federal government. For many debtors, especially those who most need the assistance of bankruptcy protection, the time required by these various new obligations and the initial costs involved are more than they could easily bear. Frankly, once the charges for the courses are put together with the governmental fees and the truly significant funds demanded by the attorneys - more than ever, after the paperwork grew exponentially more difficult following code alterations, attorneys experienced in Colorado bankruptcy law are needed to ensure not only that borrowers find the best representation but also that they shield themselves from fraud charges following documents mishandled from laziness or neglect - personal bankruptcy could be out of reach just because consumers needed the protection too much.

There is still more elements to be considered for any Colorado borrower considering bankruptcy. Either form of debt protection thoroughly harms credit ratings and F.I.C.O scores for years afterwards, up to a decade in the worst possible case, and filers should expect interest rates approaching twenty percent for vehicle loans or whatever other credit accounts they could land. Even more troubling, Chapter 7 bankruptcies, even presuming the trustee should agree that the case should go forward (and presuming the debtor could afford to declare bankruptcy in the first place), essentially guarantees that the courts are now in charge of the filers personal possessions. As long as debt elimination bankruptcy has existed in the United States, the assets of those borrowers accepted into what became known as the Chapter 7 bankruptcy were subject to forfeiture by the courts and eventual auction with the funds to be handed over the lenders whose burdens would be defaulted upon. However, previously, the courts only looked at the potential resale value of the household items when deciding what and what was not an asset while, currently, borrowers must now worry about their lives possessions being prized as according to their replacement value which renders most everything up for grabs.

Colorado borrowers declaring Chapter 7 are considerably more fortunate than their fellow citizens in this matter. Under Colorado state exemptions - as opposed to federal ones - residents filing for bankruptcy may vouchsafe household furnishings up to three thousand dollars, tools of trade up to twenty thousand, and two thousand dollars worth of art, music, collectibles, or hobby equipment. Compared to the national exemptions, the Colorado bankruptcy statutes should be seen as exceedingly generous. Furthermore, under the Colorado homestead exemption, residents filing for bankruptcy may keep their homes provided there is not more than sixty thousand dollars of equity as would be proven by recent appraisal (which should not be much of a problem given the current real estate market slowdown), and they're also able to keep their automobiles as long as there is not more than five thousand dollars of equity from blue book pricing (which, for most any vehicle, should not be an issue at all). Furthermore, aside from the homestead, all of these Colorado exemptions would be doubled for married couples filing jointly. Also, though this is true for most of the nation, retirement plans (social security benefits, I.R.A, and most any pension) won't be touched as well as most forms of public assistance including unemployment compensation and veterans benefits no matter how large the eventual funds may be.

Even though debtors filing for bankruptcy protection in Colorado are demonstrably better off than their counterparts throughout America, any consumers who remain curious about the option should keep in mind how quickly - regardless of the exemptions Colorado grants - the values of household possessions could grow depending upon the wrong trustee at the wrong time. Again, depending upon circumstances, Chapter 7 or, even, Chapter 13 bankruptcy declaration could be the right choice for a certain sort of Colorado borrower, but other alternatives should not be ignored. Admittedly, the depressed property values in Colorado, particularly the Denver and Colorado Springs areas, should effectively preclude mortgage debt consolidation for any borrower that wants to keep their family residence. Also, the Consumer Credit Counseling approach has recently come into question after the income profile of most consumer credit counseling companies showed that they accepted as much if not more from the credit card companies they were supposedly fighting against as they did from their debtor clients. When speaking with Coloradan borrowers that managed to liquidate their accumulated burdens without braving the potential household destruction of bankruptcy protection, the industry that comes up time and again as a success story has been debt settlement.

After employing a certified and experienced debt settlement negotiator to use the very threat of Chapter 7 debt elimination against the lenders, these counselors regularly induce representatives of the credit card companies to cut the accounts owed by as much as fifty percent with minimal effects toward the borrowers' credit ratings. Nothing comes for free, of course, and the debt settlement companies shall still insist upon an eventual repayment of the lingering unsecured balances in less than five years. Obviously, the debt settlement firms also have little assistance to offer with those loans attached to neither collateral nor any governmental protections. Nevertheless, considering the minimal upfront costs and the limited damage done to credit reports and F.I.C.O scores from a successful debt settlement negotiation (as well as the long list of satisfied Colorado debt settlement clients we have corresponded with over the past year), your authors would be remiss if we did not urge every potential filer for bankruptcy protection to at least have a chat with a local debt settlement professional. Even if your area of Colorado doesn't have a debt settlement specialist easily obtainable in person, there is any number of relevant professionals available from internet sites throughout the web. So much of financial analysis ends up being conducted remotely, in any event, and, as long as the Coloradan client researches the online firm they wish to talk with, there should not be any more fear to web sites than from unfamiliar store fronts. It's still likely, even probable, that bankruptcy protection will be the best possibility for you and your family, but, as long as debt settlement continues to thrive in Colorado, there is no reason not to explore other solutions.

Bankruptcy Explained by State

Borrowers throughout Arizona have not been immune to the economic difficulties crippling households across the United States, and the need for strict management of credit accounts has never been greater for American families. At the same point, even as debtors across Arizona and the southwest turn their eyes to various debt relief approaches mentioned by the media or recommended by friends or relatives, too many consumers let things slide until they believe that there's nothing left to do with their ever more depressing finances than declare bankruptcy. The authors of this article have personally worked with dozens of Arizona borrowers over the past few years that, after a lifetime of taking pride in their responsibilities, have suddenly been forced to consider the notion that they will not be able to satisfy the debts they have taken out through traditional means. We understand how hard this may be for borrowers to suddenly acknowledge the need to simply start over once accumulated debts have risen to a certain tipping point, and, for many Americans, the desire to abolish their burdens lies hand in hand with a certain level of guilt. As it happens, bankruptcy - both practically and by dint of reputation - sadly fulfills both of these requirements, and an unfortunately large segment of Arizona households puts off debt management until there's no other option remaining.

There isn't any simple equation to extinguish debt loads that have already risen to the point where borrowers need even think about utilizing external authorities licensed in the state of Arizona to liquidate their burdens of consumer debt. All the same, whenever debtors look upon their amassed accounts and find that they cannot reasonably calculate a budget that would eliminate their revolving debt load within a decade, something must be done. Whether from medical emergencies or lingering unemployment or those unexpected setbacks and responsibilities that every Arizona household shall inevitably come across (or, to be honest, even from an extended period of thoughtless spending), once borrowers finds themselves facing the prospect of foreclosure upon their primary residence or once they realize that they are going to be unable to meet their minimum credit card payments, they must examine debt relief alternatives. Chapter 7 debt elimination bankruptcies may be the most obvious solution for consumers in Arizona and across the United States, but there are more than a few problems with bankruptcy protection as it currently stands.

It is true, should you qualify for the Chapter 7 bankruptcy program under Arizona law, many of your unsecured loans would be wiped clean, but you should not make the mistake of believing that all of your debts will simply vanish. While most every citizen understands that tax liens, criminal penalties, and familial obligations (alimony or child support) remain on the books, did you know that student loans - even if held through private companies - are no longer eligible for bankruptcy discharge? Even in regards to credit card debts or other unsecured and revolving accounts, purchases above five hundred and fifty dollars for so called luxury goods and cash advances larger than eight hundred dollars made in the months before filing could be considered fraud and punishable by law. There's much more to bankruptcy than is generally understood by the Arizona citizenry, and aspects of the laws change every day. The bankruptcy your brother or boss or past roommate may have successfully declared just four years ago likely no longer exists - at least, no longer in a recognizable form.

Spring of 2005, the United States Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act after incessant pushing by lobbyists funded by the credit card companies. In the years following BAPCA, as it became known, the subsequent changes to the bankruptcy code ruined the chances of many borrowers in Arizona and across America to take advantage of the Chapter 7 program and purposefully worsened the living conditions and financial potential of all debtors' who would seek protection from whatever obligations they were unable to satisfy. Chapter 7 bankruptcies, also known as debt liquidation bankruptcies, are certainly the most well known form of governmental protections against debts they are unable to pay. Indeed, many consumers in Arizona (and, for that matter, around the United States) would be surprised to learn that there are forms of bankruptcy beyond the Chapter 7. In many ways, the debt liquidation procedure does work in the same way as we all originally imagined bankruptcy would from board games and cartoons. Financial obligations (of a specific kind, to be sure) are forever erased and the player declaring personal bankruptcy does (in most cases, considering the effects upon credit ratings and assets) lose at least the next few rounds. It's still certainly the easiest and quickest type of bankruptcy protection, and it will eliminate the majority of credit card bills and unsecured accounts: though, it's important to recognize, not nearly all of them.

Under the changes to the federal bankruptcy code in the years after BAPCA, citizens now must pass what has been called a means test in which every borrower's gross annual income - as based upon their earnings six months prior to filing bankruptcy paperwork - will be compared to the average earnings of individuals and families within the state. As things now stand, in order to be eligible for Chapter 7 debt liquidation bankruptcy protection as a resident of Arizona, you will have to make less than forty thousand dollars a year (add a member to the household, the number grows to fifty three thousand; add another, it grows to fifty nine thousand; add another, it grows to sixty six thousand; for every additional individual, there's another seven thousand dollars) from the officials guidelines of February, 2008.

These levels of income, extrapolated from numbers compiled throughout Arizona by the national census bureau, are due to change, of course, and there's still some wiggle room as regards expenses. When whichever trustee chosen by the Arizona courts examines the initial bankruptcy paperwork, they also take notice of payments owed upon home mortgages, vehicle loans, delinquent taxes, child support alongside other familial obligations, and higher education loans amounting to less than fifteen hundred dollars a year. If, once all of the preceding monthly bills (and the day to day expenses for an individual or family in Arizona as determined by the Internal Revenue Service) have been deducted from the gross income of whomever intends to declare bankruptcy, the courts still calculate that the filers should still be able to pay at least one hundred dollars a month toward their various debts over the next five years, the current governmental and Arizona state statutes insist that the borrowers attempting bankruptcy be switched over to the Chapter 13 debt restructure program.

Traditionally, Chapter 7 bankruptcies were considered 'no asset' and borrowers, presuming they had no significant investments, would not necessarily fear any dangers from the process beyond a still prevalent social stigma and the sudden destruction of their credit rating, but, after the 2005 alterations to the bankruptcy code, a host of stipulations specifically intended to weaken the protections involved and harass those borrowers that attempt to find solace in governmental safety nets wreaked havoc upon the last chance generations had depended upon. After the new laws took effect, borrowers must have their tax returns in order to even approach the bankruptcy courts, and they will have to complete a credit counseling course from a governmentally approved debt management firm before filing the initial paperwork. There are several such companies in Arizona, debtors within the state of Arizona should consider themselves lucky compared to their countrymen who hail from less populated regions, but the substantial costs are still far beyond what many of the most desperate borrowers who've fallen to such straits would be able to pay (these credit counseling firms, of course, require payment up front).

As you probably already know, one of the greatest drawbacks from Chapter 7 bankruptcy - and, perhaps, along with the damage done to credit reports and FICO scores, the signal reason that more consumers do not attempt debt elimination - is the likelihood that your assets (which, for the purposes of the Internal Revenue Service, could mean anything from your stock portfolio to your bed sheets) will be seized by agents of the court for an eventual auction intended to partially remunerate past creditors whose loans have been discharged through bankruptcy. Depending upon the whim of the arbitrarily chosen court trustee, families could lose nearly everything they own to be sold for pennies on the dollar. In past years, before the 2005 legislation altered the national bankruptcy code, households filing for Chapter 7 were made to list their personal property in terms of the value of the objects upon resale which, for anyone who's ever held a garage sale, is virtually nonexistent for most items. Now, however, the Chapter 7 documents insist upon a description of all possessions that records their theoretical REPLACEMENT value, and replenishing a household in this fashion could cripple many families.

Fortunately, for borrowers who've been living in Arizona, the state bankruptcy law is much more generous to those filing bankruptcy than what would be granted by the federal guidelines. Given the space this sort of cursory summary permits, there's no way to list all of the potential exemptions allowed through Arizona bankruptcy statutes, but we'd at least like to try to outline some idea of what borrowers may expect from the proceedings. In terms of real property, the homestead exemption covers any apartment or mobile home owned to the amount of a hundred thousand dollars AND this also exempts any proceeds from the sale of same for either eighteen months after closing or until a new residence has been bought. For those borrowers who do not own property, security deposits are fully protected and prepaid rent would be let alone up to a thousand dollars or one and a half months' value, whichever is greater. In terms of the homestead statute, a husband and wife jointly declaring Chapter 7 bankruptcy must share the same exemption, but, it's important to remember, for personal property, the husband and wife are allowed to double what's allowed by Arizona law which can make a great difference in terms of protecting possessions from potential seizure.

Again, within the breadth of this article, we cannot list every exemption, but those filing in Arizona should know that most of their household furniture should be protected. Each consumer successfully declaring Chapter 7 bankruptcy (and, again, double all of this for husbands and wives jointly filing) may keep two beds and associated linens, one dresser, one bedroom table, one living room chair, four lamps, one kitchen table, one dining room table and four associated chairs, one carpet, one couch, three end tables, one television OR stereo system, one alarm clock, one washer, one dryer, one vacuum cleaner, one fridge, and one oven. These furnishings, along with any family portraits or paintings/photographs done by the individual declaring bankruptcy, shall be protected through Arizona statutes as long as the combined value does not exceed four thousand dollars - or, once more, for couples, eight thousand dollars.

As well, each person filing bankruptcy in Arizona may keep a hundred and fifty dollars in a single bank account as well as their sewing machine, their typewriter, their burial plot, and a wheelchair or prosthesis. The family bible will be safeguarded regardless of value and all other books are protected up to a total of two hundred and fifty dollars. You may keep five hundred dollars worth of clothes, wedding/engagement rings valuing up to a thousand dollars, and one watch less than one hundred dollars. Pets, which for the purposes of bankruptcy include cows and poultry and horses, are allowed up to a total value of five hundred dollars. Musical instruments are protected up until two hundred and fifty dollars and firearms (rifle, handguns, etc) up to five hundred dollars. Automobiles are protected up to a value of fifteen hundred dollars - the rules are somewhat different for filers with medical disability - and bicycles are protected regardless of value.

Any arms or clothing or associated materials that Arizona military personnel are obligated to maintain cannot be touched by bankruptcy court trustees in any fashion, and the tools of trade for farmers (seed, machinery, animals, etcetera) and teachers (arguably everything aside from motor vehicles however necessary) should be similarly excepted up until twenty five hundred dollars value. Any stores of fuel or food are exempt provided that they are not judged to last longer than six months for the households' needs. The guarded cash value of life insurance policies ranges between one to twenty thousand dollars depending upon the familial relations of the beneficiaries, pension exemptions vary along with the debtors' former careers with Arizona public servants (social workers, firefighters, policemen, park rangers, and other state employees) granted the most lenience by far, and the benefits from health insurance and fraternal societies remain property of the debtors regardless of amount. At least three quarters of the wages earned in Arizona but not yet paid to the newly bankrupt are protected, but the actual sums that those declaring bankruptcy shall receive depends upon their household needs and potential income as determined by the judgment of the Arizona state trustee.

This is, once again, only the briefest summation of the exemptions available under Arizona law, and, for anyone seriously considering bankruptcy, it's pretty much necessary these days to enlist the services of a bankruptcy attorney to aid the borrowers in not only the eventual court hearing but also the reams of paperwork now required. As statutes change both from the federal government and from Arizona state law, the documents get ever more complex and the verbiage purposefully confusing. Frankly, for ordinary consumers untrained in finance - or even for lawyers who are not specifically experienced with the details of the Arizona bankruptcy code - it's more than difficult to accurately prepare the filing papers with any degree of certainty. In terms of assets (which, as we have shown, can be considered almost anything), borrowers are almost sure to forget one item or misinterpret the meaning of what was asked, and, whether intentional or otherwise, even the slightest lapse may result in your case being thrown out even days before discharge (and after you have spent thousands of dollars which will never be returned) or, in the worst possible eventuality, lead to charge of fraud punishable by imprisonment. In terms of their debts, borrowers are equally likely to miss one or two of their obligations when submitting their creditor matrix, and, while that shan't probably lead to time in an Arizona jail, debts that aren't submitted to the trustee will also not be discharged through bankruptcy and the creditors have all legal authority to file suits of their own for garnishment or seizure.

While it is still possible for Arizona residents to attempt a bankruptcy debt liquidation on their own, this is inevitably a false economy that flirts with grave danger on all fronts. Bankruptcy attorneys have become a necessary evil of the Chapter 7 process, and, with our national financial system crumbling and more and more Arizona workers laid off every week, they're in short supply especially within our state. Of course, never one to miss a chance to raise fees, one consequence of the sudden demand for bankruptcy attorneys around Arizona has been exponential jumps in lawyer fees for what should be (for what, more to the point, the original legislators meant to be) a remarkably simple process. Combined with the administrative costs due to the courts for attempting to declare bankruptcy and the fees for the essentially worthless credit counseling courses that borrowers are now forced to pass before they can even file paperwork, many of the lower income debtors that would be best served and most likely to be deemed eligible for the Chapter 7 program have absolutely no way to afford the procedure. (and, if needs be repeated, neither the attorneys nor the government shall work on credit when bankruptcy is involved) Much as they say it takes money to make money, it apparently now takes money to lose money as well.

Because of these costs as well as the aforementioned hardships built into the bankruptcy laws following the 2005 alterations of the national statutes, many borrowers in Arizona and elsewhere have started to investigate other alternatives for solutions to their mounting debt crisis. Many of these supposed debt relief solutions, however, have flaws nearly as dramatic as those affecting today's Chapter 7 protection, and Arizona borrowers would be well advised to do their own research about any potential debt relief strategy no matter how convincing their promotional materials or company salesmen may be. The Consumer Credit Counseling approach has been largely discredited due to their own costs, negligible effects, and destructive impact upon FICO scores - plus the growing realization that the industry has long been supported by credit card companies eager to steer borrowers away from attempts toward bankruptcy protection. Debt consolidation based upon secured loans such as the refinancing of primary residences helped bring our economy to its current state, and, even if one could find a mortgage lender still open and available, the real estate market has plummeted to such a degree (especially in the Arizona area) that equity loans would no longer work. While it surely makes sense to try and find an alternative to bankruptcy, some debt relief methods may even be worse over the long run.

To be honest, when speaking with debtors in Arizona, the only approach about which we have heard universally positive comments has been debt settlement. Relatively few of our correspondents have gone through debt settlement themselves, of course. It remains a fairly new industry, and, not accepting money from creditors, debt settlement firms haven't nearly the money for advertising enjoyed by the Consumer Credit Counseling giants. In fact, many of our correspondents in outlying regions of Arizona were forced to seek help on-line from one of the debt settlement internet sites because they couldn't find a settlement specialist working in their area. Turns out, as long as they're certified by the national board and maintain a good and verifiable reputation, there's not a great deal of difference to be found from quality companies whether or not you work with your debt settlement professional in person or over the phone, and the Arizona borrowers that we spoke with found success from both sorts of companies.

The thrust of debt settlement isn't that far removed from the Consumer Credit Counseling approach, trained debt analysts work out a household budget that would ensure continual payment of existing debts while requesting a waiver of past fees and lowered interest rates from representatives of the lenders, but, since they're not also paid by the lenders, they ask for rather more. Essentially, after binding together the various debts of an eligible borrower, the program uses the threat of bankruptcy and promise of a sped up schedule of payments to negotiate a reduction - sometimes as much as half of the original - of the borrowers' balances and interest rates. Because of the many variables surrounding each Arizona consumer's specific debt ledger (not all creditors are on board with the plan) and viability (income and past payment history will play a part in determining entrance to the settlement program), we should not pretend that every problem debtor could avoid bankruptcy through the debt settlement program, but it bears analysis for anyone that wishes to safeguard their possessions and maintain a credit rating the years after all debts have been erased.

Personal bankruptcy protection still may be the only path toward financial freedom for some particularly desperate Arizona borrowers, but it's recently become a long and winding road with no clear end in sight. For those debtors who are simply not qualified to attempt debt settlement or any other program, bankruptcy protection yet means something in Arizona and, in some version, it will always be around, but there's no harm to examining the other avenues that have recently opened up.

California Bankruptcy Laws-Learning How to Use Them

With this article we will explain the application of the California bankruptcy laws and its exemptions; laws and how they work. These California bankruptcy laws are taken from federal bankruptcy laws, title 11 of the United States Code.

Melisa Jackson is a former client of Personal Bankruptcy Avoidance, and she was wondering about some issues with the California bankruptcy laws, thus Martin Rogers, our specialist in bankruptcy will help her with this interesting topic.

Melisa Jackson:

How are the California bankruptcy laws organized?

Martin Rogers:
The California State is divided into four (4) bankruptcy districts with four (4) bankruptcy courts named after each district. These courts are:

- California Eastern bankruptcy court

- California Northern bankruptcy court

- California Southern bankruptcy court

- California Central bankruptcy court

Melisa Jackson:

How does the state of California deal with bankruptcy?

Martin Rogers:

California bankruptcy laws allow people to pay secured loans; letting the owners of the property recover and sell it at the normal market price after paying the whole debt. People can find the California bankruptcy laws exemptions in the exemptions chart.
California bankruptcy laws accept different kinds of exemptions. There are two systems, 1 and 2. Every costumer has the right to choose which one suits them best.

Melisa Jackson:

How do California bankruptcy exemptions help people?

Martin Rogers:

As I mentioned before, California bankruptcy laws accept different kinds of exemptions; system 1 and system 2. By using system 1, people receive exemptions in homestead as follows amounts:
- From around $45,000 to 49,000 if the person is single and is not disable in any way

- From around $72,000 to 74,000 for families, and

- From around $122,000 to 124,000 for senior citizens

people also receive exemptions in personal properties as follows

- Bank deposits up to $1,900

- Buildings materials up to $1,900

- Motor vehicles up to $1,900

And other belongings that go up to $4,800. System 1 also covers all types of insurances, pension plans and official benefits such as health aid and compensations. System 1 also covers wages of a minimum of 75%.

California bankruptcy law System 2 is more different than System 1 because it differs in some exemptions: homestead to $17,500 for all classes, motor vehicle to $2,800, personal benefits to $17,500 and pension benefits (only the ones qualified by ERISA) and this one goes up to $915.

Melisa Jackson:

Anybody living in the State of California can make use of the California bankruptcy laws?

Martin Rogers:

According to the new California bankruptcy law that has taken effect on October 2005, anybody who wants to take advantage or make use of the California bankruptcy exemptions, must prove to the state that he or she has lived for as long as two years as a permanent resident in the state of California. The person must have resided for that period before filing for bankruptcy. Otherwise the person has to spend the 180 days prior to the two year period.

The 2005 Bankruptcy Act within the California bankruptcy laws states that it is required that all individual debtors who file bankruptcy on or after October 17, 2005, undergo credit counseling within six months before filing for bankruptcy relief and complete a financial management instructional course after filing bankruptcy.

Melisa Jackson:

Martin, what are the mandatory conditions to file for bankruptcy based on the California bankruptcy laws?

Martin Rogers:

On a previous article of mine titled "Bankruptcy, Way Out or Deep Problem", a previous client of mine asked the same question in order to know if he should consider filing for bankruptcy as a solution to his financial situation, this is what I answered him:
"When you start thinking about filing for personal bankruptcy you should live in a state for 90 days preceding the filing and you should have less than $ 290,000 on total unsecured debt or less than $ 860,000 on secured debt. In October 2005 the new bankruptcy law went into effect and established that consumers who earn less than the minimum wage could still file for Chapter 7 personal bankruptcy. But people, who earn more than that, need to apply for Chapter 13 bankruptcy type. This one requires a repayment plan."

Bankruptcy: What You Need to Know

Personal bankruptcy is a legal way to give people with overwhelming debt a fresh financial start. Many people do not realize that there are five types of bankruptcy options available under the U.S. Bankruptcy Code; however, for most consumers there are really only two viable options; Chapter 7 and Chapter 13 bankruptcy.

Chapter 7, bankruptcy is entitled Liquidation: In a Chapter 7 bankruptcy, a court-supervised procedure occurs during which a court-appointed trustee collects the assets of the debtor's estate, converts them to cash for repayment, and makes all necessary distributions to the debtor's creditors; however this is all done within the debtor's right to retain certain exempt property. Traditionally, there is little or no nonexempt property in a chapter 7 bankruptcy. Due to this fact, there may not be an actual liquidation of the debtor's assets. In this case, it is called a "no-asset bankruptcy." It is important to realize that a creditor that is trying to collect on an unsecured claim will only get a distribution from the bankruptcy estate if the case is an "asset bankruptcy" and the creditor can provide proof of their claim with the bankruptcy court. In almost all chapter 7 bankruptcies, the debtor will be grated a discharge that releases them of personal liability for most dischargeable debts. The entire process normally takes just a few months from the time the bankruptcy petition is filed.

Chapter 13, bankruptcy is entitled Adjustment of Debts of an Individual with Regular Income: A chapter 13 bankruptcy is traditionally used for people who have a regular source of income or a full-time job. For many people, chapter 13 is preferable to chapter 7 because it allows the debtor to keep some assets. A chapter 13 bankruptcy allows the debtor to repay creditors over time. This time traditionally varies from three to five years. This type of repayment proposal takes place at a confirmation hearing. During this confirmation hearing, the court will either approve or disapprove the debtor's repayment plan. This decision largely depends on whether the repayment plan meets the Bankruptcy Code's requirements for confirmation. In a Chapter 13 bankruptcy the debtor is usually able to remain in control of their possession and property while making payments to creditors; however, payments are made via a court trustee. Unlike chapter 7 bankruptcy, the debtor does not receive an immediate discharge of their debts. Under chapter 13 bankruptcy, the debtor must complete the repayment plan before the discharge is granted; however, the debtor is protected from lawsuits, garnishments, and other creditor action while the plan is in effect.

It is important to remain cognizant of the fact that not all debts are discharged under bankruptcy. The debts that are able to be discharged will vary under each chapter of the Bankruptcy Code. However, the most common types of non-dischargeable debts are tax claims, debts that are not presented by the debtor to the court while filing for bankruptcy, debts for spousal or child support or alimony, debts to governmental units for fines and penalties owed to government entities, debts for personal injury caused by the debtor's operation of a motor vehicle while driving intoxicated, debts for willful and malicious injuries to person or property, debts for government funded or guaranteed educational loans, and debts for certain condominium or cooperative housing fees.

In order to file for bankruptcy, you must file a petition in federal bankruptcy court. You must file a statement of assets and liabilities as well as schedules listing of your creditors. Once you have finished filing bankruptcy, your creditors can no longer take action against you to collect discharged debts.
Negative Aspects of Bankruptcy
In chapter 13 bankruptcies, you may end up paying back 50% or more of your current debts. Additionally, if you miss a regularly scheduled payment at anytime during your chapter 13 bankruptcy repayment plan, you could end up in violation of the court and forced to repay all the debt!

One of the most difficult parts of bankruptcy is learning to live with the fact that filing bankruptcy limits your personal spending to items that the court considers absolutely necessary. In most cases, debtors do not complete their chapter 13 bankruptcy repayment plans. Most people filing chapter 13 bankruptcies think they will be able to complete their repayment plan; however, only about a third of them actually do. Additionally, chapter 7 bankruptcy may stay on your credit longer than a chapter 13 bankruptcy. This time ranges from 7-10 years for most people. Many people do not realize that if you own a home with a sizable amount of equity, have a fair amount of assets to protect, or have co-signers on a loan, you most likely will not be able to file chapter 7 bankruptcy under current law. Now that the new bankruptcy legislation has passed, it will be even more difficult to file for bankruptcy.

Many people think that filing bankruptcy is the silver bullet that will fix all of their debt and credit related problems; however, filing bankruptcy is the worst thing you can do to your credit. Most lending institutions will consider your bankruptcy when evaluating you for a personal loan even after the bankruptcy has expired. Qualifying for a loan after filing for bankruptcy can be very difficult and could cost you considerably more than a person that has not filed for bankruptcy.

It is understood that some situations will require you to file for bankruptcy. However, you should avoid bankruptcy if at all possible. A good debt settlement company can help eliminate most, if not all, of your unsecured debt so that you do not have to file for bankruptcy. If you require additional information on the subject of bankruptcy you may want to contact a bankruptcy attorney in your area.

Cheap, Affordable Bankruptcy Without Lawyers - Beat the New Higher Bankruptcy Costs and Save on Fees

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.

EExorbitant 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.