Bankruptcy Reader

Guess what’s the latest on the bankruptcy front: Congress thinks you are not paying enough and now wants to increase the fees for filing bankruptcy. One more fee hike will only block many people, who have suffered genuine financial misfortune, from filing bankruptcy. Our legislators want to raise the fee for filing Chapter 7 bankruptcy by $40, to $439. I’m sure most of you are now wondering what these guys want to do with this extra money. Believe it or not, they want to better compensate Chapter 7 trustees, who are appointed by the court to investigate the filers’ assets, meet with and pay creditors, and oversee bankruptcy sales.

So probably, these trustees are underpaid for the kind of work they have to do. But does that mean you have the freedom to loot money from people who already don’t have enough of it? I mean most people wouldn’t grudge the trustees earning a little more but does this extra burden have to be shouldered by the poor debtor — a person who is already in a financial mess and needs all the help s/he can get to get out and move on.

A low credit score would seem to be a strong hint that you should be filing for bankruptcy soon, but is not always a good gauge. According to experts, consumers who file bankruptcy can have very different credit histories with a wide range of FICO risk scores at the time they file. And they can be affected in very different ways. Bankrate.com reports:

Attorneys say that if you do have to file bankruptcy, preparation and timing are extremely important, especially with the new provisions in the law such as the Chapter 7 bankruptcy "means test," which determines a consumer’s disposable income.

Read more: Bankruptcy timeline: Pre-bankruptcy

The new bankruptcy law, which took effect in October last, was designed to make it more difficult for people to write off their debts under Chapter 7 bankruptcy. And for the first time, the new law mandated that anyone filing for bankruptcy would have to compulsorily go through credit counseling to consider alternatives before filing — but the moot question is; does this solution work? Orlandosentinel.com reports:

Steve Bartlett, president of an industry association called the Financial Services Roundtable, supports the law but says it’s flawed. "Early on, most of the pre-bankruptcy counseling is not especially useful because it’s only occurring for people right before they go into bankruptcy," Bartlett said. "The flaw is that the bankruptcy counseling is only occurring at the end of the process when you have little option."

Read more: Bankruptcy law put to the test

Now I have the answers to the confusing question that has been niggling me for some time. Here are some of the recently revealed facts:

• Americans have never before been so deep in debt as they are now.
• Bankruptcy lawyers are claiming that they are seeing an increase in the number of people who want to file for bankruptcy. But they also state that the law is too strict and many people are finding it difficult to file.
• And this is the most interesting fact that was revealed recently — that the number of filings has dropped to 20-year lows.

Now, anybody in his or her right sense has the right to be as confused as I was. So now, here comes a piece of news, which could complete the jigsaw puzzle. It seems that though six months have passed since laws were passed making it harder to declare bankruptcy and yet there’s still confusion over who can file. Cfn13.com reports:

Bankruptcy lawyers say some bill collectors may be inadvertently telling debtors if they missed October’s deadline under the old laws - then it’s too late to file - which is incorrect.

Read more: Bankruptcy Confusion