Nearly a year into the federal government's overhaul of the nation's
bankruptcy laws, attorneys say the changes have done more harm than
good.
In a survey of 700
members of the National Association of Consumer Bankruptcy Attorneys
(NACBA), respondents state that bankruptcy filings have increased since
the law was adopted.
More than two
thirds, 68.5%, say their bankruptcy filings were up in the third
quarter compared to the first half of the year.
More than half of
the attorneys, 57.5%, expect filings to reach their pre-reform levels
by the time the one-year anniversary of the measure arrived October 17.
Attorneys
indicated that the bankruptcy law changes have made it harder for
consumers by increasing expenses and paperwork involved with bankruptcy
filings.
More than three
quarters of bankruptcy attorneys say the time involved in preparing a
bankruptcy filing has gone up by 50% or more.
An overwhelming majority of
respondents, 92.8%, say that bankruptcy reform has mostly increased
costs, compared to 0.7% who say it has mostly improved results.
Among the other survey findings:
Less than a
third of bankruptcy attorneys are seeing an increase in forced Chapter
13 repayment filings, which is contrary to what proponents of the
changes projected.
More than 60% of bankruptcy attorneys report a jump in consumer inquiries about bankruptcy.
Attorneys
indicate that the "vast majority" of bankruptcy cases involve
unforeseen expenses rather than wasteful spending. Among the most
common causes of bankruptcy filings, they say, are medical expenses,
unemployment, home-related debt and increased credit card interest
rates.
"In practice, the
new bankruptcy law changes have proven to be a nearly total bust in
terms of what the proponents of the changes forecast," says NACBA
Officer Ike Shulman, a bankruptcy attorney in San Jose, Calif. "The
only good news here is that the law is so flawed and has been
interpreted in such a way that some of the dire consequences many of us
feared fortunately have not come to pass."