The Wall Street Journal roused varied reactions
with its story on a Cheaper Way To File For Bankruptcy
by Katy Stech Ferek.
First, I am opposed to licensing of most professions,
including law. It deceives the public into believing competence exists, where it may, or may not.
Take away the licensing, and consumers will have to be more careful.
So, I am not a you-have-to-hire-a-lawyer for this guy.
Any lawyer licensed in Michigan can file your bankruptcy, and may be an expert, or know less about bankruptcy law than you do. That she has a license to practice law tells you nothing about competence
Chapter 7 Bankruptcy
The disturbing quote from the story is:
chapter 7 protection, a process that almost 500,000 consumers used last year to sell valuables and cancel unpaid debts.
Well, uh, no, that is NOT what Chapter 7 does.
Which shows how easy it is to oversimplify and mislead with general statements.
Michigan allows use of the federal bankruptcy exemptions; most states do not.
So, over 90% of the Chapter 7 cases in Michigan are no asset, meaning, the trustee collects nothing for creditors. The debtor, the one who files bankruptcy, loses no “valuables.”
The debtor determines which property to claim as exempt, and it can be jewelry, real estate, bonds, or other valuables.
THIS DEPENDS ON YOUR STATE.
The story points out that the law changes in 2005 greatly increased the cost of filing bankruptcy, because time consuming new burdens were placed on bankruptcy lawyers, like me, which cost more time, which meant we had to charge more.
The government now charges a $335.00 filing fee for chapter 7 bankruptcy cases, before you get to paying an attorney.
Now, that fee can be waived by the bankruptcy court.
How Can People Who Are Broke Afford Bankruptcy?
This is the question and the issue the new software addresses.
The differences in exemption laws between the 50 states is a challenge to put in one software package. And the federal forms and amounts therein change periodically.
But these things can be overcome. I pay over $1,000 per year to keep my bankruptcy software up to date.
And the poorer people who want and need to file Chapter 7 bankruptcy are preyed on by “petition preparers” who are limited to $100 compensation in Detroit, for typing.
They are not to give legal advice, but many of them do, after charging $500 or more, and telling their clients to lie about it if asked.
And messing up the paperwork they prepare, costing their clients more money.
The Eastern District of Michigan has an excellent program, Access to Bankruptcy Court. (ABC)
If you qualify, little or no income, you get a real bankruptcy lawyer from the volunteer panel, the filing fee is waived by the court, and the ABC program pays the lawyer $400 for handling the case.
This is an excellent way to address the issue, though not exclusive, and there is a place for the new software project.