Relief Debt Systems

Filing for Chapter 7 or 13 bankruptcy has gotten more expensive since changes in the nation’s bankruptcy laws took effect in 2005. A new study found that people who file bankruptcy face a 55 percent increase in costs since bankruptcy reform.

Bankruptcy Fees for Attorney and Other Services

The study–published in the American Bankruptcy Institute Law Review–was done by Lois R. Lupica, a New York bankruptcy attorney, and Thomson & Knight LLP, and examined data from consumer bankruptcy cases in six states. The costs to consumers was for fees and expenses related to an attorney, the trustee, filing, credit counseling and debtor education, and other professional fees. The median cost of filing Chapter 13 rose to $4,077 in 2007 and 2008; $2,930 in 2003 and 2004. The cost of filing for Chapter 7 rose to $1,399 from $900.

“Greater up-front costs may have hindered some consumers from filing bankruptcy, but there may be other factors at play,” Lupica said in a statement. “There was a large volume of negative publicity in the aftermath of the 2005 amendments, as well as heightened efforts by aggressive debt collection and consolidation firms.”

Other Debt Solutions

Besides the costs, there are other reasons that it makes sense to avoid filing bankruptcy and look for other possible debt solutions. A bankruptcy filing stays on your credit report for ten years. During that time expect to have difficulties qualifying for a mortgage, auto loan, credit cards, or other types of financing. A bankruptcy filing could also cost you a job. With so many unemployed workers competing for jobs, more employers have added credit checks to the job application process.

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