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Dec. 11, 2006 Bankruptcy Reform Act: No help to consumers in debtListen to the podcast >
ANN ARBOR, Mich.—Consumers in financial trouble are being squeezed harder than ever. Many debtors are learning—or soon will learn after the holidays—that filing for bankruptcy isn't as easy as it used to be, a University of Michigan expert says. More than a year after provisions of the Bankruptcy Reform Act took effect in October 2005, debtors are finding it more expensive and time-consuming to file for bankruptcy protection, said John Pottow, U-M Law professor. The act, however, has not solved consumer financial distress. "Reform, as it was styled, focused on reducing the number of bankruptcies but paid no attention to their cause," said Pottow, a bankruptcy expert. "The data we see suggest the underlying cause is getting worse: a growing number of Americans still cannot pay their debts." Debts are likely to increase during the holidays. Consumers rely heavily on credit cards to buy gifts, decorations and other related items, then get debt-induced hangovers in January when they go to their mailboxes to find much higher than expected credit card bills. If debtors consider filing for bankruptcy protection, they can expect higher costs. Pottow said reports suggest attorneys fees have jumped by 50 to 100 percent in response to the complexity of the new law. "The statute also increased court filing fees, and new credit counseling and paperwork requirements make bankruptcy a more time-consuming (and hence expensive) endeavor," he said. "So if fewer distressed people can afford to file for bankruptcy, what will the increasing ranks of the distressed do? They won't just disappear."
Related Links: Additional information on Pottow Additional information about the Law School
Contact: Jared Wadley Related Categories: Business Social Science |
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