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Articles Posted in Chp 7 Bankruptcy; Debt Management Plans

Our Louisville bankruptcy attorneys have become increasingly familiar with the oxymoron, “Too broke to go bankrupt.” coinjar.jpg

For those contemplating filing for a Chapter 7 bankruptcy in Louisville (the most common form), generally, the upfront cost is about $1,500. That’s the nationwide average, according to the National Bureau of Economic Research.

And the truth is, when you’re drowning in debt, who has an extra $1,500 lying around?

What that’s going to mean is anywhere between 200,000 to 1 million people who would like to file for bankruptcy this year, but can’t, according to a study conducted by three midwestern universities. Those social scientists were originally looking at the number of bankruptcy fillings that shot up after people received their tax returns. However in the course of their research, they found that a large number of people just simply couldn’t be afforded.

Now, our Louisville bankruptcy attorneys believe it’s important to note that there are steps that can be taken to help you achieve your financial goals, and Chapter 7 bankruptcy is an excellent way to help you regain your financial footing. Consulting with an experienced bankruptcy attorney is the first step to determining what all your options are – so don’t just assume that because you don’t have $1,500 cash in hand you can’t do it. Call us, and we’ll be happy to see how we can help.

Bankruptcy costs actually weren’t always so high. They went up in 2005 (just before the housing bubble burst) with the passage of the Bankruptcy Abuse Prevention and Consumer Protection Act. The idea was to make it so fewer people would file for bankruptcy by upping the requirements of the filling process. That’s meant more paperwork and more fees.

To that end, the measure was somewhat successful, but the framers of the act likely didn’t anticipate the large number of people who would need bankruptcy help in the wake of The Great Recession. So while the rate of bankruptcies have fallen just a bit since the law was passed (1.3 percent last year, down from 1.4 percent in 2004), the average income of those filing has gone up – a sign of an ill economy.

Some of the added fees include pre-bankruptcy credit counseling, which is required, as well as a pre-discharge debtor education class. Both of these will run, on average, about $85.

There are a lot of reasons why someone might file for Chapter 7 bankruptcy, including a foreclosure, job loss or medical emergency. Some experts, though, are concerned that the price tag of a bankruptcy is going to mean those who are the most vulnerable will be left with fewer options.

But again, we don’t want people feeling intimidated about the process. That’s why we really encourage folks to contact us, even if they think they may not be afford bankruptcy and especially if they find the new processes thoroughly confusing. Trying to go it alone is generally a mistake, especially given the new requirements. If you make an error, your chances of being allowed to re-file are significantly reduced.

Bankruptcy is a fresh start, not an added burden.

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WHY DEBT MANAGEMENT PROGRAMS DON’T WORK

by Tracy L. Hirsch, Attorney

Obviously, for most individuals, bankruptcy is a last resort. Although it is important to consider all options before deciding to file bankruptcy, it is equally important to understand the consequences of alternatives to bankruptcy. While debt consolidation companies can appear to be a viable alternative to bankruptcy, they are, for the most part, ineffective and have long lasting negative implications.

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