money after a bankruptcy filing, help spread the
myth that once you file, it is impossible, or you have
to wait years, or both, to get credit again.
We were told that the bankruptcy law changes of ten years ago would save all consumers money, because fewer people would file bankruptcy, so, credit card companies would lose less, so, they could charge the rest of us less.
Well, I never believed it to begin with, and a N. Y. Federal Reserve bank bankruptcy study bears me out.
The individuals who go bankrupt experience a sharp boost in their credit score after bankruptcy, whereas the recovery in credit score is much lower for individuals who do not go bankrupt.
I also tell folks, you are a better credit risk AFTER filing bankruptcy, and wiping out the debt you cannot pay, than you are now, before filing bankruptcy.
You many not get that loan, of course you will have to pay higher interest than if you always paid your bills on time.
But that is never the choice for people who call me. If you have the money to pay bills on time, why would you call a Detroit bankruptcy lawyer?
The new bankruptcy law has resulted in a decrease in bankruptcy filings, so sayeth the study, and every bankruptcy lawyer I know.
When I started way back when, the filing fee was $60; it is now $335.
My fees basically doubled after the bankruptcy law changed, because it was twice as much work.
That looks to be in line with the national average.
People who are insolvent still cannot pay their bills, so I am not satisfied that the creditors are actually collecting more, even though bankruptcy filings are down.
The study concludes:
Taken together, these findings suggest that the 2005 bankruptcy reform was associated with a large and persistent reduction in bankruptcy filings and a rise in insolvency and foreclosures, concentrated primarily among low-income individuals in court districts with the largest increases in filing costs. This is consistent with the notion that the increase in filing costs is driving these responses. Moreover, we show that insolvent individuals who do not go bankrupt exhibit more financial stress than those who do, suggesting that these individuals would likely prefer to file for bankruptcy if they could afford it.
So, more folks would file bankruptcy to get out of the spider web of debt, if they could.