Cost of Filing for Bankruptcy Increased Substantially

A recent study funded by the American Bankruptcy Institute (ABI) and the National Conference of Bankruptcy Judges (NCBJ), revealed that the bankruptcy reforms implemented in 2005 had made the process of filing for bankruptcy more complicated and more expensive, with the costs associated with filing for bankruptcy being found to have increased by up to 55 percent.

The author of the study, New York bankruptcy attorney Lois R. Lupica, of Thompson & Knight LLP, commented on the results of the study: “The government’s stated goal in passing bankruptcy reform was to eliminate abuse of the system and create a set of higher eligibility standards for consumers, but this is the first time that the financial impact of those standards has been quantified.”

The study considered the costs associated with the process of filing for bankruptcy, including filing fees, credit counseling fees, debtor education fees, debtor’s attorney fees and expenses as well as trustee fees and expenses. The data considered during the study was obtained from consumer bankruptcy cases conducted in several judicial districts located in West Virginia, Florida, Maine, Illinois, Georgia, and Utah.

Lupica, who is also a Maine Law Foundation Professor of Law at the University Of Maine School Of Law in Portland, added, “Attorney fees are just part of the required administrative expenses that may have contributed to the overall decline of consumer bankruptcies, even in the face of the public’s increased debt load, foreclosures, and loan defaults.”