Jeffrey M. Rosenblum, P.C.
A Fresh Start

The effects of the 2005 bankruptcy overhaul

New York residents who are in the process of bankruptcy may be facing the negative effects of a 2005 overhaul of the bankruptcy system, according to the American Bankruptcy Institute. Two panelists in an ABI webinar report that the Bankruptcy Abuse Prevention and Consumer Protection Act actually created more difficulties for honest consumers. Another, however, argued that the act has succeeded in meeting its goal of reducing the increasing number of bankruptcies.

The BAPCPA was created to reduce abuse of the bankruptcy system, but some experts claim that it has been ineffective. While the act was intended to prevent fraudulent bankruptcies, one professor of law from the University of Maine School of Law asserted that there is no evidence of widespread bankruptcy abuse among consumers. She argued that reductions in consumer filings are due to factors other than the BAPCPA.

The BAPCPA has been associated with an increase in Chapter 7 attorneys' fees of 38 percent, according to the Federal Reserve Bank of New York, as well as a general increase in the cost of filing for bankruptcy. While filings have dropped, one expert warns that there has been a rise in foreclosures as well as insolvent individuals. The reduced filings may be among those who need the bankruptcy system the most. It is also easier for high-income debtors to successfully complete a Chapter 13 bankruptcy than for low- and middle-income debtors.

For those attempting to file bankruptcy under tougher regulations, a bankruptcy lawyer may help dispel some common bankruptcy misconceptions. Despite the popular image of debtors attempting to manipulate the bankruptcy system, many lawyers believe that most who file are hardworking individuals looking for a way to resolve overwhelming consumer debt. Working with a lawyer can help make the process of dealing with creditors and filing the appropriate documents less stressful.

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