Chapter 7 consumer bankruptcies rising

[lovuian]

http://feeds.bignewsnetwork.com/?sid=5796c2c0f558d5d5

First-quarter U.S. bankruptcy data shows Chapter 7 consumer bankruptcy filings now exceed Chapter 13 filings, which require repayment.

LexisNexis reported Thursday that the increase in the proportion of Chapter 7 filings, which do not require repayment, to Chapter 13 filings follows changes made last October to the nation's bankruptcy laws.

A spokesman said the data indicate the trend toward more Chapter 7 filings will continue.

In the fourth quarter of last year, right after the law was changed, Chapter 13 filings outpaced chapter 7 filings by 8 percent. In the first quarter of 2006, that trend reversed.

By March, more than 60 percent of bankruptcy filings were chapter 7 cases and not chapter 13 cases for a total of 51,096 filings, more than twice as many total bankruptcies as were filed in January.

more...
In other words people were right people applying for bankruptcy truly couldn't pay their debt...

[bluestateguy]

1. A Democratic Congress must repeal that law

nt

[depakid]

3. Why would Dems do that? Their own minority "leader" voted for it!

So did many of thier members.

Unless and until a lot of those types are gone- I don't expect to see much of ANYTHING that will really help working people (or God forbid the poor).

(actually, I don't expect to see them win the majority back either, until they finally wise up, reign in and marginalize their DINO's, but that's another matter).

[saigon68]

6. DINO BIDEN (d) MBNA voted for it

The captive little puppet of MBNA did his masters bidding.

I know a woman who husband recently died of agent orange induced cancer. She has $300,000.00 worth of medical debt. Because of Biden she has to go through "debt counseling" to educate her to live within her budget before she can file.

Biden is a disgusting little Lackey of the Corporate Interests.

[NYC]

2. This is not the first article to emphasize that.

...In other words people were right people applying for bankruptcy truly couldn't pay their debt...

[Nomen Tuum]

4. Thank You, Joe Biden.

Just leave the Senate and take your seat on the Bank of America board.

[truthisfreedom]

5. great plan, guys. nice. now everyone will build up even more debt and

then crash and burn using chapter 7... 100,000 bucks is so easy to be in debt these days.

[happyslug]

7. The real effect of the Changes were minor

And affected about 5% of all Bankruptcy Filers. The biggest changes involved the requirement of Debt Consoling and the ability to file IFP (Waving the Filing Fee of $274 which goes up to $299 on April 9th, 2006).

Now there is also the test for "Abuse of the Bankruptcy System", the problem is how Congress wrote the abuse it affects about 5% of filers. For example if you are earning less than Median Income for your State (Nationwide the Median Income is about $43,000) you can file Chapter 7 with a filing that NO ABUSE is occurring. Since Median Income is defined as the midpoint in Income (half the population earns less than Median Income, half earns more) over 50% of the population are exempt from a filing of abuse of the Bankruptcy system. Adding to the Median Income test are other factors that can make a person to be found NOT TO be abusing the Bankruptcy system, thus the filing this change will only affect about 5% of the Population.

As to the requirement of Debt Counseling, it is a pain, but Congress Ordered it. Now my clientele who tend to be low income people this service must be provided free (as it must be provided free to everyone below 150% of the Federal Poverty Line). I have found it adds 4-5 days to filing a bankrupt as the Counseling agency does it job, but I can generally file it in time before any real damage can occur.

For my Clients the addition of the wavier of the filing fee if you are low income (Income is less than 150% of the poverty level) more than compensate for the above (Getting together $2-300 can be difficult for low income people). Thus as a whole the act has been good for people whose income is less than

List of approved Debt Counselors:
http://www.usdoj.gov/ust/eo/bapcpa/ccde/cc_approved.htm

List of Median income by State:
http://www.usdoj.gov/ust/eo/bapcpa/bci_data/median_income_table.htm

US Trustee Data page:
http://www.usdoj.gov/ust/eo/bapcpa/index.htm

US poverty Guideline:
http://aspe.hhs.gov/poverty/06poverty.shtml
http://aspe.hhs.gov/poverty/06fedreg.htm

2006 HHS Poverty Guidelines
Persons in
Family or Household
48 Contiguous
States
and D.C. ----Alaska---Hawaii
1 -$ 9,800 -$12,250 -$11,270
2 - 13,200 - 16,500 - 15,180
3 - 16,600 - 20,750 - 19,090
4 - 20,000 - 25,000 - 23,000
5 - 23,400 - 29,250 - 26,910
6 - 26,800 - 33,500 - 30,820
7 - 30,200 - 37,750 - 34,730
8 - 33,600 - 42,000 - 38,640
For each additional
person, add
-----3,400 - 4,250 - 3,910

[DuaneBidoux]

8. You're obviously a lawyer. I just filed last year (Sept) after a small..

business failure. One thing I'm curious about. I paid $1500 to my lawyer to file and that took care of everything. But my lawyer said that my case and the several he had left after me would be his last bankruptcy cases because it would drive the cost up over $5000 per filing and that it would be much more complicated for him and simply not worth the effort. Was he telling stories?

[happyslug]

9. At that time that was the feeling, and it still exists.

The new act makes attorneys liable to creditors for deliberate frauds of his clients even if the lawyer does not know about them. This is the concern, what happens when a Client lies to his or her attorney about the Client's assets? This worried attorneys for the old act forbade attorneys from giving advice on how to avoid putting all of your assets into the Bankruptcy (i.e. Bankruptcy attorneys MUST have the client report all Assets), but the NEW Law hold the attorney liable even if it is the Client who is lying to his or her own attorney. In fact my organization were looking at those rules and seriously thought about not doing any bankruptcies (we later relented and decided to see how the new rules are applied by the Judges).

Thus the answer is yes and no, in my practice I do not advise my clients to defraud anyone (It has always been against the law), but what about inadvertent mistakes by a Client? What about when a Client lies to his or her Attorney? Under the new rules that is a big questions, but most of my clients are low income so not much of a concern (Rarely do my clients have assets any where near the Federal Exemptions). Higher income clients? That is a good question if one of them does not tell the attorney about ALL of the client's assets. Clients do not always tell their attorneys everything, but the attorney can now be held liable to creditors if it is later found out a Client did NOT report a non-protected asset. This will increase insurance rates for Attorneys just to protect themselves from an large Judgment against them do to the lies of their Clients.

[kineneb]

10. and we are among them

...combination of job loss/medical debt/disability/very-low income lead us to file for Chapter 7. Mom paid the attorney fees, since we didn't even have the money for that.

The credit counseling is a joke. I had to explain to the counselor that people who qualify for Medicaid have no cash assets. And that Social Security pays by the month only, not for 52 weeks. They were telling us to try to save money- Ha! Apparently they don't understand the low-income healthcare system. If you save money, you loose your perscription coverage (Medicaid) and wind up paying that money for medications. Save, my ass; like we could...