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Should You Settle Your Debtor or File for Bankruptcy

As a Bankruptcy AttorneyNew Jersey, clients call my office on a weekly basis who have tried to settle their debts and ask me if they should have instead filed for bankruptcy. This is the ultimate question any potential client should ask before they either file for bankruptcy or choose to settle their debts. Let’s go over the advantages and disadvantages for each of those two paths.

Settling Your Debts

For those with substantial credit card debts, settling those debts is a valid option. For many clients, the holder of the debt will be willing to settle that debt for a fraction of the principal amount. I have seen companies offer to settle the debt for 25% – 50% of the debt. The rule of thumb I tell clients is like this – the longer you have not paid that debt – the more times it has been sold off to another debt buyer – the more likely you can settle that debt for a fraction of the principal amount.

Clients often ask me though that up until now they have been paying the minimum payments and are not even late yet. In that case, I will advise them that the credit card company will not yet offer you a discounted rate because you are not late on your payments yet. Only when you become delinquent on your payments then will they be open to settling your debt. The longer you do not pay the debt the better discount you will receive. However, if you intentionally do not pay them, then the longer you are delinquent the more your credit score will decrease.

The Debt Settlement Catch

As a New Jersey bankruptcy attorney, I often have to advise clients about the catch the debt settlement programs do not tell you. Yes, you can settle your debts at a discount but you must have cash savings to afford the payoff. The debt holder will not accept a debt settlement from you unless you can payoff the entire discounted amount within a few days. I often find that clients think that they can get a debt discounted and then just pay monthly the discounted amount – this is not possible.

Therefore, unless you have savings to pay off each creditor one by one then debt settlement is not a realistic option. What a lot of the debt settlement companies do is have you pay them a monthly amount each month and they retain a certain percentage to build up savings for you to payoff the debt holders. However, this is something you can do yourself. Often, these debt settlement companies pay themselves first from these monthly amounts so if you cannot afford to make more payments they have already gotten paid and they keep all the money without settling your debts.

Another drawback to debt settlement is that you will be taxed on the debt the credit card company forgives. Let’s say for example you settle a ,000 credit card debt for ,000. That means that you paid off the credit card company in a lump sum ,000. Now you no longer owe them any debt, that’s great! The IRS, however, will count the other ,000 that the credit card company forgave as income to you for tax purposes.That means you’ll be owing the IRS a percentage of that ,000 that the credit card company forgave you on the debt depending on your income for that year.

Debt Settlement’s Bottom Line

In summary, the advantages to settling your debts versus filing for bankruptcy are you can settle your debts for a fraction of what you owe and you do not need to file for bankruptcy and put your assets at risk, however, you will need to have a lump sum payment to settle your debts, you may have to wait months before you can settle your debts until the debts have aged or you have a lump sum to pay them off, and you will be taxed on the amount the credit card company forgives.

Bankruptcy as an Alternative to Debt Settlement

So what can bankruptcy do for you that settling your debts cannot do for you?

Bankruptcy has many advantages over debt settlement. The first advantage is cost.As I mentioned above, if you are going to settle your debts you will need a lump sum payment to pay them off. For example, if you are going to settle a ,000 debt then you may have to come up with a lump sum of ,000-,000 to pay them off at once. For many clients they cannot come up with that kind of money. By contrast, a chapter 7 bankruptcy in New Jersey costs anywhere from ,000 – ,500. This is a one- time flat fee and it eliminates all of your debts in many cases.

When you settle your debts you have to pay off each one, one-by-one. When you file a chapter 7 bankruptcy, you literally wipe out all of your credit card debts. That means whether you have ,000 of credit card, ,000 or 0,000 you can wipe out all of that credit card debt for one flat-rate.

Eliminating Your Debts Quickly

When you file for a chapter 7 bankruptcy, you can expect to discharge your debts and get out of bankruptcy in 3-4 months. This is a lot faster than saving up a lump sum and paying off each creditor. This could take a year or more and there is no guarantee that you will even be able to settle your debts during that time period.

Erasing Your Debts Tax Free

When you file for a chapter 7 bankruptcy, all the debt you eliminate is tax-free. As I mentioned previously, when you settle your debts you have to pay income tax on the amount the credit card company forgave. By contrast, you pay no income tax at all on all the debt you eliminate in bankruptcy.

#1 Drawback to Filing for Bankruptcy: Your Assets

The biggest drawback to bankruptcy is that if you have assets they could be put at risk in bankruptcy. That is why you need to speak with a qualified Bankruptcy Attorney New Jersey and find out if any of your assets will be at risk before you file for bankruptcy. In New Jersey for example, you can keep up to ,000 per person in the equity in your home according to the New Jersey bankruptcy exemptions. Therefore, if you are single and you have let’s say ,000 of equity in your home, then if you were to file for a chapter 7 bankruptcy you may lose your home (although you will receive the ,000 of equity you can keep in your home). Therefore, before you file for bankruptcy you need to take an accounting of all of your assets such as any business you own, real estate, vehicles, or boats. Then figure out if any of these items have any equity in them. If they do, check your state’s bankruptcy exemptions and see if your equity is within the allowed amount. If they are then you can freely file for bankruptcy without your assets being affected. If some of your assets are above the allowed equity amount then you need to speak with a bankruptcy lawyer to find out if there is anything you can do to keep the asset in bankruptcy. Sometimes when clients have assets that will be affected by bankruptcy, I ask them whether they are willing to trade that asset to get rid of all the debt. If the client will discharge let’s say ,000 worth of debt but will lose a car with ,000 of equity in it – it is clear that the client is still coming out way ahead by filing for bankruptcy.

#2 Drawback to Filing for Bankruptcy: Payments to Insiders

Another drawback you have to check out before you file for bankruptcy is that any payments made to insiders family members or business partners within 1-year of filing for bankruptcy may be undone in bankruptcy. For example, let’s say you paid your Mom back ,000 within the year before you file for bankruptcy. If you file for bankruptcy, then the trustee of your case could sue your Mom to recover the ,000. Of course, no one wants to involve someone else in their financial troubles so often times a client may delay their filing until after the 1-year period or may choose to file and just warn that family member of the possible result. At the end of the day though the client may still be way ahead even with this result

Conclusion

The answer to the question should you file for bankruptcy in New Jersey is really it depends on your situation. If you have a lump sum of money to pay off your creditors and have assets that you would lose in bankruptcy, then of course you should settle your debts instead of filing for bankruptcy. If your assets would not be touched in bankruptcy then it may make more sense to file a chapter 7 bankruptcy in New Jersey since that would be cheaper and faster than settling your debts. Either way, the most important thing for you to do is to speak with a qualified New Jersey bankruptcy attorney about your case before you either settle your debts or file for bankruptcy. I offer a free phone consultation to help clients with this so I encourage you to call.

Tags: Bankruptcy, Debtor, File, Settle, Should

How to Get a Cheap Minnesota Bankruptcy Attorney

How to Get a Cheap Minnesota Bankruptcy Attorney in Minneapolis

Fees for a Minnesota bankruptcy attorney can vary from around ,200 (like us) to as much as ,000 for a Chapter 7 personal bankruptcy.  Not only do we keep our rates competitive, but we also offer a guarantee that if you find any Minnesota bankruptcy attorney with a cheaper fee we will beat it by .

Below are some more ways that can help you save money and get a cheap Minnesota bankruptcy attorney.
Bankruptcy Alternatives Can Save You Money

Do you think bankruptcy your only option?  Unfortunately, too many people are forced into bankruptcy without ever knowing that there are other options.  Usually we are able to negotiate to reduce your debts by over 50%.  Sometimes working out a debt reduction is a better option than filing for bankruptcy.

A Minnesota bankruptcy attorney has more leverage to negotiate your debts down than you because creditors known that the attorney can file bankruptcy for your.  In this case, creditors prefer to negotiate because they will usually get less money if you end up in bankruptcy than if they get 50% of what you owe them directly from you.

Besides negotiations there are other ways to reduce your debts.  Be sure to pick a Minnesota bankruptcy attorney that does not only persuade you into bankruptcy.  Instead choose one that is willing to explain all of your options and allows you to decide what will work best for you.

Basically a Minnesota bankruptcy attorney might be able to assist you in getting rid of your debts cheaper than a bankruptcy would cost you, especially if you consider the impact that a bankruptcy has on your credit and ability to get loans.
Bulk Discount: Cheaper Minnesota Bankruptcy Attorney

Some Minnesota bankruptcy lawyers including us will give you a discount if you and your spouse are both filing for bankruptcy.  Sometimes this discount is also available if you come along with another family member or a friend.  A Minnesota bankruptcy lawyer can offer the services cheaper because the attorney will likely spend less time communicating with both of you than if the attorney had to communicate with two separate clients.
Warning: Don’t File Your Own Bankruptcy to Save Money

The federal bankruptcy law is complicated and very confusing.  It is not worthwhile to try to file bankruptcy and pay the filing fees and end up finding out that you make a mistake and your debts are not discharged.

Even most seasoned Minneapolis attorneys that are not experienced with bankruptcy law refuse to do bankruptcy on their own.  They find the bankruptcy law and process too confusing too do it without the help of someone with experience in bankruptcy law.  It is not just Minneapolis attorneys that are like this.  St. Paul and other attorneys through the Twin Cities are also like this.

I have yet to hear of a person who filed for bankruptcy on their own that did not end up with problems that resulted in them having to hire a bankruptcy attorney.  Usually the attorney then charges more to clean up the mess of them filing on their own than if they had just gone to the bankruptcy attorney in the first place.

Unfortunately the bankruptcy system is not cheaper or simpler and it is just a fact that must be accepted that to file bankruptcy you will need to hire a Minnesota bankruptcy lawyer.
Warning: Don’t Buy Bankruptcy Books

In most cases bankruptcy books are a waste of time and money because you can get the best advice for your situation by meeting with us for free.  For free you can meet with a Minnesota bankruptcy attorney to look at your particular situation and avoid wasting time and money on bankruptcy books.  Additionally, if you file for bankruptcy now, the books will likely be useless the next time you file for bankruptcy due to the ever changing bankruptcy law in Minnesota.
Warning: Don’t Fall Prey to Online Bankruptcy Scams

Online there are many companies that try to make money by taking advantage of people in debt.  Often they will try to sell you programs, illegitimate services, and scams.  It is best to stick to getting bankruptcy advice from people who are lawfully authorized to give legal advice (i.e. attorneys).  Also, there is no reason to spend money when we offer a free consultation with a bankruptcy attorney to look at your situation and let you know your options that include alternatives to bankruptcy.
Other Ways to Get a Cheap Minnesota Bankruptcy Lawyer in Minneapolis

If you know of other ways to find a cheap Minnesota bankruptcy lawyer in Minneapolis, leave a comment below.

learn more about Cheap Minnesota Bankruptcy Lawyer at http://minnesotabankruptcyattorney.com

Tags: Attorney, Bankruptcy, Cheap, Minnesota

Private Bankruptcy Solutions Defined

This essay attempts a very simple outline of the various sorts of bankruptcy accessible beneath the banruptcy code for American debtors, and the fundamental procedures and procedure involved in a debtor filing for individual bankruptcy for legal discharge of his or her debt.

BANKRUPTCY AS A CONSTITUTIONAL Appropriate.
Private bankruptcy is a fundamental Constitutional suitable. Write-up I, Section 8, of the United States Constitution authorizes Congress to enact “uniform Laws on the subject of Bankruptcies” for the benefit of debtors who are United States citizens. Beneath this grant of authority, Congress enacted today’s “Bankruptcy Code,” last drastically revised or amended in 2005. The Bankruptcy Code, which is codified as title 11 of the United States Code, is the uniform federal law that governs all bankruptcy cases. Hence, bankruptcy being a fundamental Constitutional proper, debtors will need a cheap low-cost option bankruptcy program to high lawyers fees, and want to be capable to afford bankruptcy with out lawyers, or with lawyers. The point is that the price and fees of filing for bankruptcy will need to by no means be made to be so high as to be a bar or hindrance for qualified American debtors who have to have to file for bankruptcy. Could that imply having to file bankruptcy with no bankruptcy attorney – to assure it will be low-low expense bankruptcy? Yes, possibly. Atimes, when the circumstances warrant that to make it practicable for a debtor to be ready to excercise or delight in that basic citizenship proper.

THE Simple PROCEDURES OF THE BANKRUPTCY Procedure
The procedural aspects of the bankruptcy method are governed by the Federal Guidelines of Bankruptcy Process (generally referred to as the “Bankruptcy Rules”) and the local rules of every bankruptcy court. The Bankruptcy Guidelines include a set of official types for use in bankruptcy cases. The Bankruptcy Code and Bankruptcy Guidelines (and nearby guidelines) set forth the formal legal procedures for dealing with the debt issues of men and women and companies.
There is a U.S. bankruptcy court for every single “judicial district” that has been set up in the country. Every state has 1 or much more districts, and there are 90 bankruptcy districts all across the entire country, with every single of the bankruptcy courts typically having its very own Clerk’s offices.

The court official with selection-creating power more than federal bankruptcy circumstances is the United States bankruptcy judge; he or she is the judicial officer who presides more than the given United States district court. The bankruptcy judge may choose any matter connected with a bankruptcy case, such as eligibility to file or no matter whether a debtor need to receive a discharge of debts. In realistic and practical terms, however, significantly of the bankruptcy approach is seriously not “judicial” or “legal” or even “financial” at all. But is, rather, merely ADMINISTRATIVE, both in nature and content, and is carried out, in reality, fully away from the bankruptcy courthouse. In deed, in instances dealing with the chapters 7, 12, or 13 varieties of bankruptcy (meaning largely the private kinds of bankruptcy, as opposed to corporate or organization kinds), and quite often in chapter 11 cases, this administrative process is carried out by someone known as a “trustee” – a individual who is not a bankruptcy judge or a court officer, but merely contracted by the court is to approach and oversee the situation.

Beneath the bankruptcy approach, a debtor’s involvement with the bankruptcy judge is commonly very limited. If you are a chapter 7 debtor (see below), for instance, you normally will not seem in any bankruptcy court or judge’s courtroom, nor will you ever see the bankruptcy judge – unless, say, an objection is raised in your situation by one of your creditors, an occurrence that is rather uncommon. If you are a chapter 13 (see beneath) debtor, you would only have to appear just before the bankruptcy judge at one point, only at a hearing as to the confirmation of your repayment strategy. Usually, no matter if in a chapters 7, 12, or 13 kind of situation, the only formal proceeding at which a debtor is necessary appear or be personally present in a case, is what is referred to as “the meeting of creditors.” Informally called the “341 meeting” due to the fact it is Section 341 of the Bankruptcy Code that mandated it, this meeting is held principally and primarily just so that the debtor’s creditors can question the debtor about their debts and property. This meeting is usually held with the bankruptcy attorneys, not in the court home or any judge’s chambers, but at often at the offices of the U.S. trustee.

Tags: Bankruptcy, Defined, Private, Solutions

More Debtors Going Bankruptcy Without Lawyer – Save on Bankruptcy Fees Using Petition Preparer

MORE DEBTORS GOING BANKRUPTCY WITHOUT LAWYER. SAVE ON BANKRUPT FEES, DO IT CHEAP.
 
It would probably not surprise too many of us today, given the current economic conditions in the nation and the long emerging national statistics that show that more and more Americans all across the country have been filing personal bankruptcy at astronomical levels. But a recent national random sample pulling made by one researcher about chapter 7 and chapter 13 bankruptcy cases filed by American debtors during the two month period of July and August of 2010, made this significant finding: namely, that overall, a little more than 1 out of every 9 cases (11.3%) filed in the American bankruptcy courts, were filed by the debtors themselves, WITHOUT using an attorney. In deed, the pulling, which was done by Professor Robert Lawless of the University of Illinois Law School, a well-known expert on bankruptcy and credit law, showed that the rate of non-attorney filings by debtors, was higher in chapter 13 cases (13.8%) than it was in chapter 7 (10.1%). In short, today more debtors are undergoing bankruptcy without lawyer.

An interesting piece of information, no doubt!

But note, though, that these specific figures are yet merely a “national average.” You should note that, though significant, this figure of 1 in 9 bankruptcy filings being done without an attorney, will probably not really strike many experts who are knowledgeable in the field as particularly dramatic or representative of the whole statistics. In deed, as Lawless himself pointed out, a fact long-established in bankruptcy administration has been that there are some court districts across the United States in which the rate of persons who file bankruptcy without a lawyer, is in fact as high as 30%. Or more! As in major urban areas, for example, such as California, New York city, etc. In such districts, debtors save on bankruptcy fees with petition preparer, as there is really no such thing as low-cost bankruptcy lawyer.

BUT WHAT DOES THIS DO TO THE LAWYERS’ ARGUMENT THAT BANKRUPTCY IS SO “COMPLEX, and Hence Requires and Justifies the Lawyers High Fees in Bankruptcy”?
 
Nevertheless, this current release of the Lawless survey is very significant. The Lawless survey which shows that nationwide at least a significant proportion of bankruptcy filers, some 1 out of 9 of them (and the findings by other data which show that up to 30% or more in certain larger urban court districts) do so without using attorney, immediately throws a big wrench in one basic argument of the organized bar and bankruptcy lawyers obviously engaged in the protection of their lucrative business of bankruptcy filings. A major favorite of bankruptcy lawyers and common argument often heard from them, is that probably the most important reason why the job of doing what is, essentially, a FINANCIAL business of bankruptcy filing, should be left solely to remain the exclusive preserve of “attorneys,” is that, according to them, the process involved in filing bankruptcy is a “complex” undertaking. According to them, doing bankruptcy work is unusually a forbidding task too difficult for anyone, except for the “highly skilled and educated” type, to do, and if you’re a debtor even with any thoughts whatsoever about doing bankruptcy yourself, maybe you had better re-thing that, for, they say, nothing could be more foolish or “risky” an undertaking for you to attempt! You simply, of course, should just hire an “attorney” to walk you through it like a baby, they say!

NOW THIS QUESTION: So with this latest reminder just released, if bankruptcy is supposedly so “complex” that only a person with presumably the special skills and training of a bankruptcy “lawyer” can undertake it, then how is it that such large number and huge proportion of debtors (some 10, 20 or 30% or more of them, depending on which districts) who are not “attorneys,” actually do it? And do it largely just as successfully and as well as the lawyers, themselves? But is there ever really any such thing as low-cost bankrupt lawyer?

“It’s very interesting that the pro se rate for the converted/dismissed chapter 13 cases, is the same as the overall rate.,” noted Professor Lawless about the findings of his survey. Adding that “That would suggest that being pro se in chapter 13 is not meaningfully associated with having one’s case dismissed or converted.” Consequently, more debtors going bankruptcy without lawyer as they seek to save on bankruptcy fees with petition preparer

FACT: Actually, the reason the above situation is the actual case, is rather simple. The reason is that, actually, the truth of the matter is that most personal bankruptcies (or, for that matter, a good deal of small business bankruptcies, as well) are really in deed simple. So much so, in fact, experts (lawyers, court trustees, judges, etc) who specialize in bankruptcy law and procedures, say, that you really don’t need the services of a lawyer to handle ordinary personal bankruptcy since they are generally too simple, they say, and too elementary and largely clerical to undertake.

Many experts who make such points generally cite two basic reasons on which they base this claim: First, that an overwhelming majority of personal bankruptcy cases are so-called “no asset” or “minimum asset” cases – that is, cases in which the owing debtors literally have or own absolutely NOTHING that the creditors can claim or attach, let alone any money for paying the lawyer’s hefty fees; and second, the FACT that bankruptcy, they say, is really a relatively simple matter (contrary to the layman’s common belief that bankruptcy is a complicated procedure), which often actually involves the mere completion of simple routine forms and submitting them to the local bankruptcy court.

Janice Kosel is a Professor of law at Golden State University, San Francisco, and a recognized author and expert on personal bankruptcy issues. She says: “If you can do that [prepare your income tax return] you can probably handle your… [bankruptcy] yourself…”

Stephen Elias, California Attorney, prominent author and specialist in bankruptcy law, most recently summed it up this way: “There is seldom a good reason to use an attorney in a consumer Chapter 7 bankruptcy case. The procedures are almost exclusively administrative – that is, there is no appearance before a judge…The forms are all (with very few exceptions) pre-printed in plain English…[But, in spite of
that fact], What’s tragic is that people actually think they have to have attorney representation [to be able to do it].”

And Jonathan B. Alper, practicing Florida bankruptcy attorney, put it this way: “Most Chapter 7 consumer bankruptcies are relatively simple and [hence the] legal fees are [should be] low compared to other legal work.” Do bankruptcy cheap?

IN SUM

Is there any way to do bankruptcy cheap? Summed up simply, an important objective reality already – an established FACT, according to a recent research finding cited above – is that at least 1 out of every 9 debtors (and it’s even much higher than that in certain parts of the nation) who file for bankruptcy across America today, file it WITHOUT using a lawyer. That there are more debtors going bankruptcy without lawyers. Rather, they file bankruptcy, in stead, with the assistance of a non-attorney service called the Debt Relief Agency or Bankruptcy Petition Preparer – usually well-trained and experienced paralegals specialized in bankruptcy document preparation and procedures, but who offer their services to debtors at far lower and more AFFORDABLE cost than the lawyer’s fees. Given this reality, it becomes clear that as a debtor probably contemplating filing bankruptcy, you need NOT, as the bankruptcy lawyers are often wont to claim you should, necessarily run to or use a person titled a “lawyer” whenever you wish to file bankruptcy, or necessarily have to pay exorbitant legal fees usually associated with attorney involvement in bankruptcies. Rather, you have a real option that you may choose to exercise – a non-attorney bankruptcy option that could be just as effective in getting you a bankruptcy filing, but which is low-cost and more affordable. With bankruptcy fees still rising, you can definitely save on bankrupt fees with petition preparer.

NEED MORE INFORMATION?

Wish to join the growing army of restive, financially hard-pressed bankruptcy seekers across America today who seem increasingly to prefer and flock to available “non attorney” assistance and services to get their bankruptcy filing done, but at costs that are low, low, and affordable? Or, may be you want pointers on how to end the “too broke to even declare bankruptcy” problem confronted by many debtors today, through using a good, reliable Federally-approved Debt Relief Agency or Bankruptcy Petition Preparer to do a successful bankruptcy filing for yourself at an incredibly low-cost that you can well afford? Please visit this site: http://www.afford-bankruptcy.com

Tags: Bankruptcy, Debtors, Fees, Going, Lawyer, more, Petition, Preparer, Save, Using, Without

Can Debtors Afford Bankruptcy? Finding Low-Cost Bankruptcy

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 shaded, 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.”

Janathan 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?’”

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 ,000 or more for the simplest Chapter 7 bankruptcy, and ,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 the tried, seems to be a non-lawyer low-cost bankruptcy.

“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, straighforwards, 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, accessibly, and AFFORDABLY. In sum, America, both the

Tags: Afford, Bankruptcy, Debtors, Finding, LowCost