Texas readers may have heard the depression-era joke that some people were so broke after the stock market crash in 1929, they could only commit suicide by jumping up from their basement apartments.
These days, individuals and families facing bankruptcy may have some of those same feelings, especially after hearing that a Chapter 7 bankruptcy proceeding typically costs about $1500. That's because Congress amended the laws through the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act.
In an effort to cut down on bankruptcy filings, Congress raised fees and added additional paperwork and even required credit counseling and debtor education. Those amendments have given rise to the sentiment today that some people are too broke to even afford bankruptcy.
To be sure, the filing fee was raised to $300, although it may be waived upon request if the filer is within 150 percent of the poverty income level. Then there's credit counseling, said to cost an average of about $85. Beyond that there are legal fees, pushed necessarily higher because of the additional work involved to comply with the added requirements under the 2005 law.
An interesting trend has developed this year. It appears that more and more taxpayers in Texas and elsewhere are using their state and federal tax refunds to fund their Chapter 7 and related bankruptcy petitions. Statistics show a definite spike in filings around the time that taxpayers typically receive their refunds.
Consumer debt educators offer the advice that those who file for bankruptcy would be best served by being sure that it's done right the first time. That's because improperly filed petitions risk being dismissed by the court for failing to meet requirements. If that happens, it will likely have a negative impact on the filer's credit without the benefit of a release from debts that is possible with a correctly filed petition.
Source: CNN Money