Chapter 7 and Chapter 13 bankruptcy are often used to help individuals and families get relief from debt. Credit card bills, medical debt and other loans can often be wiped out by these kinds of bankruptcy. But in the last 5 years, consumers have seen the cost to file for Chapter 7 or Chapter 13 bankruptcy increase.

In 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act was passed. In a new study, the American Bankruptcy Institute Law Review says that the 2005 changes significantly increased the cost for getting bankruptcy relief.

What Does the Study Show?

Lois Lupica, the author of the study, analyzed expenses related to filing for bankruptcy, including attorney’s fees, trustee costs, court filing fees and credit counseling courses in 2003 and 2004 as compared to 2007 and 2008. The study found that:

  • The average cost of Chapter 13 bankruptcy rose from $2,930 to $4,077.
  • The average cost of Chapter 7 bankruptcy rose from $900 to $1,399.

That is an increase of 39% and 55% respectively. For individuals and families already struggling with financial problems, the increased burden to file for bankruptcy relief can present a real problem.

Lupica suggests that the 2005 “means test” and requirement that individuals complete a financial education course prior to receiving a bankruptcy discharge are primary reasons for the increased cost to get bankruptcy relief. These changes continue to affect people seeking bankruptcy help today. In fact, more than 1.3 million consumers are expected to file for bankruptcy in 2010.

Source: Consumers paying more to file for bankruptcy 31 Aug 2010