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Can Debtors Afford Bankruptcy? Finding Low-Cost, Cheap Bankruptcy

It seems there is today in these current hard national economic

times, palpably one ominous additional burden for the average

heavily indebted American consumer who, perhaps, sees his or her

only recourse for some relief from his crushing debt as lying in

filing bankruptcy: the cost for bankruptcy, and finding cheap,

low-cost bankruptcy that debtor can afford. This often mean, in

essence, finding pro se or non lawyer bankruptcy alternative.

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 cheap, low-cost

bankruptcy? A bankruptcy that the debtors can reasonably afford?

Clearly, the cost for bankruptcy is gradually emerging as one of

the most critical impediments to being able to file for

bankruptcy for the average debtor seeking to file bankruptcy.

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.....Bankruptcies Filed......... Source and 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' ARGUMENTS FOR THEIR HIGH FEES

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, some

argue, 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

$2,000 or more for the simplest Chapter 7 bankruptcy, and $4,500+

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 low cost, cheap non lawyer

bankruptcy that debtors can reasonably afford.

"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 public as

well as private sector, must fast prepare for, devise, and

implement, a drastically different but effective bankruptcy

filing system that provides the current million plus per year and

the upcoming additional millions of bankruptcy filers who will be

coming into the bankruptcy filing pipeline per year, a genuinely

affordable means for them to file for bankruptcy - the 1.4

million American filers (or more) that are expected to seek the

bankruptcy relief in 2009 calendar year alone, and beyond.

Seed Newsvine

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