The present economy is leaving thousands of Americans with the option of not being able to afford filing Chapter 11 Bankruptcy protection.
The average cost to file for consumer bankruptcy protection is now more than $1,500 according to recent research by the National Bureau of Economic Research.
The recent study conducted by a group of professors from Columbia University, University of Chicago and Washington University in St. Louis have concluded that Obamanomics has presented over 200,000 to almost 1 million Americans with the inability to financially afford to file for bankruptcy. This after notching the trend in bankruptcy filings spiking after tax rebates programs conducted over the previous years.
“For lots of people, bankruptcy has been taken off the table as an option because of the severe fees involved,” said Jialan Wang, co-author of the report.
Among those fees is a charge of about $300 just for filing the paperwork with the federal court, while the rest typically goes to bankruptcy lawyers, said Wang.
And there are other expenses on top of that, including fees for mandatory pre-bankruptcy credit counseling and a pre-discharge debtor education course. These average about $85 altogether, according to a recent study sponsored by the American Bankruptcy Institute.
What this means for many Americans which have seen their debt escalate like and avalanche, along with job losses, foreclosure on mortgages, medical emergencies during difficult economic times, are now left with their only means of recovery now financially unaffordable.
“It becomes harder and harder to pay off the debt as interest payments get higher, so your debt grows larger and larger,” she said.
In trending news, since 2004 the bankruptcy rate has decline slightly from 1.4% to the current 1.3% last year, however, the number of filings has increased, as noted in the NBER study. The findings indicate that the new requirements are pricing out many of the consumers who are least able to afford the fees, said Wang.
“It ends up being the relatively better off, or middle-class consumers who can actually afford to file, and the people with lower incomes can’t afford to file,” said Wang.