Bankruptcy - Two Years Later

Happy Anniversary! The bankruptcy law changes are now two years old. Many say that the revisions have caused complete chaos in the consumer finance world. Foreclosures are at an all time high and government officials have declared that we are on the precipice of recession. Consumer spending will soon follow. After all, how many people in foreclosure buy big screen TVs or new cars?

What differences has it made in Connecticut?

• Foreclosures in Connecticut have more than doubled over just the last year, yet bankruptcy filings are still only 40% of what they were two years ago. Why? Because many people think bankruptcy will not let them preserve their home. The credit industry has done a great job of creating the myth that bankruptcy is no longer an option. Many attorneys I know still believe this and consumers are leaving their American dream to rent an apartment. The credit industry will tell you that the numbers indicate success. Really?

• Or maybe its the cost. The cost of filing a bankruptcy case has more than doubled in the past two years. Court filing fees increased to $299 for a simple Chapter 7 case; there are new costs for Credit Counseling (typically $50) and Financial Education Courses (another $50); and typical attorney fees are increased substantially due to the additional tasks an attorney must perform. Sure the fees have increased, yet for about the cost of your mortgage payment, you can file bankruptcy and possibly save your home.

• Paper, paper, and more paper. The typical case generates more paper both from the client and for the Court. Things like 6 months of paystubs, 2 years of tax returns, months of bank statements, and store & bill receipts are necessary to document a typical case. The bankruptcy petition has increased from 20 - 30 pages to more than 50 pages. The office copier and computer scanners are overheating from the paper. Yet, the requirements aren’t really more than doing a detailed tax return.

• Good help is hard to find. Good help has always been hard to find. There are many lawyers who have stopped doing bankruptcy cases because the law now makes them personally responsible if they are less than careful in preparing a case. This is a benefit in disguise for the consumer because the change has left only the experienced and skilled lawyers taking cases.

In every storm cloud there is a silver lining, if you look. Times are bad, the law is terrible, and much is at risk. However, there are competent lawyers who can assist you through troubled waters. There is not much good to say about the changes in the bankruptcy code, but it is still your last best hope to save your home.