According to a recent study many Americans who should file for bankruptcy don't for one simple reason: It's too hard. Before 2005, filing Chapter 7 bankruptcy was the only reprieve most Americans who were in excessive personal debt could utilize. Under Chapter 7 one could effectively erase all of their consumer debts by liquidating their assets and proving they did not have the means to pay off what they accrued. Major debts, such as car notes, remained; the rest were wiped clean. Of course there were penalties. For example, the filing remained on your credit history for 10 years -- but filers were no longer faced with a mountain of debt that they couldn't afford.
Sounds relatively sweet, huh? The credit card companies felt the same way. In 2005 the Bankruptcy Abuse Prevention and Consumer Protection Act was passed which introduced new standards, such as means testing, credit counseling and higher filing fees, to the bankruptcy process. The result was that fewer people were able or willing to file for bankruptcy. Instead of facing the arduous process of trying to file for Chapter 7, more individuals have opted to live a debt-laden life. But this new trend has created a different set of problems for both those in financial crisis and creditors.
USA Today reports:
Instead, concern exists about a growing number of Americans who need bankruptcy protection but cannot get any benefit from it or simply cannot afford to file. As their financial problems worsen, that hurts everyone because it can hinder the economic turnaround...
Many debtors have no choice but to delay filing for bankruptcy. Some wait until they receive a tax refund, and others cash out their retirement savings to pay for a lawyer. But postponing filing is not good for debtors. It's similar to delaying going to the doctor, because you'll just end up with more problems, says Lawless, professor of law at University of Illinois.
Despite the high cost and complications, filing for bankruptcy might not only help you to cope -- it might also speed our economic recovery. If you are in truly dire circumstances regarding debt, don't be ashamed to consider Chapter 7 bankruptcy. Here are three things you should know if you're considering filing:
- You can -- and should -- file if your salary has decreased significantly. Many professionals have been laid off and are unable to find employment that is comparable to their previous earnings. Maintaining the same standard of living is impossible. If you can't afford to cover your bills, delaying the process of filing only prolongs the inevitable and puts you deeper in debt.
- Your fee application can be waived. The application fee for filing Chapter 7 bankruptcy is $300 – and that doesn't include the lawyer's costs. While you will have to hustle to find an attorney who will handle the process for free, the court-filing fee can be waived due to hardship.
- Your student loan payments can be reduced. Student loans issued by the government cannot be written off, but they can be modified. You must prove undue hardship, which means you are facing tough financial times and simply cannot pay, but the court can decrease your payments.
For more information and to weigh your bankruptcy options more carefully, please visit the USA Today special section on bankruptcy.
A trained life coach, S. Tia Brown has spent the last 10 years following her passion for journalism as an editor, writer and TV correspondent. Brown has worked for CNN, E!, MSNBC, the New York Daily News, Essence and Black Enterprise. Most recently she served as senior editor for In Touch Weekly magazine. Check out her advice column Do Better, Be Better at www.tiabrown.com. 
Comments: (8)
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By: Nanci Rogers on 6/11/2010 1:27AM
I am a Bankruptcy Petition Preparer and my fee is 1/4th what a attorney, who uses paralegals, bankruptcy petition preparers and virtual bankruptcy assistants to fill out the needed paper work to file,charges.
I only do Colorado at this time, but it is an alternative to a lawyer.
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By: Amanda Whatever on 6/11/2010 2:56AM
I am 23 years old, I filed bankruptcy in Feb. and just had $12,000 in debt discharged. I only took stafford and federal loans and at most in the next 15-25 years that I'll be paying is 250 dollars (because of the economy I have put them into deferment and don't pay anything). I didn't pay an attorney, I did not pay a preparer. I did it all on my own, and also prepared a waiver of the filing fee and it got approved. I basically didn't pay a dime to file bankruptcy. I pity anyone who cannot read preface to forms and fill them out and go to a court and file them by theirselves, if you can't do this then you obviously deserve to pay a $1000 dollar filing fee.
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By: Lopez Perez on 6/11/2010 6:32AM
By waiting til the statue of limitations is up. Sit down you were lucky to have removed what was mistakenly removed. 10 yrs.http://www.articlesbase.com/health-articles/pure-cleanse-pro-review-where-to-buy-2599833.html
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By: Imanda Waldon on 6/11/2010 8:35AM
Due to Hurricane Ivan and one missed mortgage payment, we were forced into a Chapter 13 to save our home. Our total debt not including our mortgage was less than $17,000.00. Fifty four months later and pure hell we have paid over $32,000.00 in the Chapter 13. There stating that we will be out in Oct 2010, about $38,000.00. Do the math. What they dont tell you is:
1. Your ten years start when your discharged. This program had ruined us for 15 years. Hard to overcome.
2. There is a 85% failure rate on the Chp 13. They dont tell you this either.
3. The trustee gets 10% of your money monthly and then transfers money to your attorney.
4. The trustee can allocate up to 6% in additional interest on each creditor. By the time you file for bankruptcy, your creditors have stuck it to you.
5. They dont want you to make it out!!!!!Beware!!!!! It will ruin your life.
6. Go see a Certified Credit Counselor through HUD. Its free and they only charge 3% of what you owe.
7. We are paying 16% interest through the Chapter 13 not including what our attorney gets. This is the federal government. It is suppose to help people......NOT LEGALLY SCREW THEM!
8. You have to surrender all your income tax money. They dont tell you it doesnt come off the balance of what you owe. IT IS INVISABLE MONEY.
9. Folks getting RICH off others having a hard time. It is not fair.
DONT DO IT!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
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By: Mary on 6/15/2010 5:10PM
Once you were told (or figured out) that you'd actually be paying more to the bankruptcy court than the actual value of your home, your next step should been to dump the house and everything else in a Chapter 7! Converting from a 13 to a 7 is allowed! You would have paid nothing more than the cost of the attorney's fee and the cost of moving into an apartment or a lease purchase property!
In order for bankruptcy to best serve you, understanding the difference and the rules of a Chapter 7 vs. a Debtor's Court (13) is critical. Most of "us" get "had" because we panic first, and secondly we don't count up the bottom line cost of each petition that we can choose to file. (A Chapter 7 or a Chapter 13)
Sure, you love your home - who doesn't? But when life hands out blows like Katrina and the recent recession that can knock the literal as well as the financial foundation out from under you, often, its better to limit your losses by letting go and giving yourself a fresh, new start. Just like you fell in love with and bought one house, you can do it again!
You have some Chapter 7 and Chapter 13 facts mixed up! A Chapter 13 (Debtor's Court) stays on your credit for 7 years; A Chapter 7 (Complete Bankruptcy) stays on your credit for 10 years. However, in either case you can begin rebuilding your credit the moment you receive your Discharge Paper (usually 30-90 days after your petition is filed)! That beats the heck out of 54 months and $32,000!!!
Knowing how to go about rebuilding your credit is the most critical step after bankruptcy and unfortunately, it's also the step that credit counseling services and bankruptcy attorneys do not teach. (Why would they? They're banking on your repeat business when the next crisis hits)!
Consequently and understandably anger, frustration and huge financial loss (like your own) set in, and what was established as a protection for you ends up a devastating experience, leaving a bad taste in your mouth and a major deficit in your bank account!!!
There is a method to the madness and I'm sorry that you weren't informed; you could have saved yourself a lot of aggravation, heartache and money by putting the house and everything else in a Chapter 7, and starting over. You would have qualified for purchasing a new house 2 years after receiving your Chapter 7 Discharge Paper)!
Thankfully, October is not that far away and you'll be finished with this nightmare! It may be one of the most expensive lessons you ever bought but I'm hoping that you will commit to learning the facts and teaching the lesson to other brothers and sisters, in hopes of keeping them out of such an awful trap!
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By: meanvee on 6/11/2010 9:33AM
Unless you already own a house and have a good running car that will last for 10 more years, Don't do it, borrow from family, sell house items, hell, if push comes to shove, take out a payday loan, because bankruptcy will ruin you for the next 10 yrs, you won't be able to get approved for anything, all cash buddy, thats it. Nowadays they check your credit for everything, even applying for jobs.
http://www.BestChoicePayday.com - debt help also.
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By: ricky on 6/12/2010 10:30AM
it amazes me someone would file bankruptcy on a 10 thousand debt. i work 3 jobs, i roughly had that amount recently and decided when i get my tax money put it all to my bills. then everytime i got paid i would put as much as i could to MY billz. i only owe 1000.00 on cc. it can be done if ppl get motivated. one friend was like no it cant, but he doesnt live with in his means. he goes on vacation twice a year spends money like it grows on trees but CHOOSES not to pay his billz. guess he deserves to feel like he's drowning in debt.
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By: Don't do it BK is a rip on 6/12/2010 10:50PM
For those of you who are thinking about BK research and ask plenty of quesitons. I refuse to use Bk I opt to contact my creditors and negotiate my bills down and pay each one despite me owing 25k I'am now down to 10k and will continue to do so I have also negotiate them removing the listing off of my credit report thanks to creditinfocenter.com its a site that deals with every type of credit issue.
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