The Theory That Americans Are Too Broke To Go Bankrupt Is A Very Dangerous Suggestion For Consumers

I am writing this piece in response to an article entitled Americans: Too Broke To Go Bankrupt by Blake Ellis | CNNMoney.com published on Mon, May 7, 2012 6:55 AM EDT. In this article, Mr. Ellis suggests that the pricing for filing a bankruptcy case is too high and that Americans cannot afford the prices. Money is important whether it is one dollar or a million dollars. However, the amount of money that a Debtor pays for a Bankruptcy case verses the benefits received from the case is clearly something that Mr. Ellis has failed to mention in his article. Mr. Ellis also fails to mention that most jurisdictions placed limits on the amount of fees that an attorney can charge a Debtor to prepare and administer the case.

Nevertheless, let us really examine what Mr. Ellis is trying to say in his article. He is suggesting that $1,500.00 is too much for Debtors to pay to get relief of debt that could range from $20,000.00 to more than $100,000.00. Let us put a fee of $1,500.00 into perceptive for Debtors with $30,000.00 of debt owed to unsecured creditors. I use $30,000.00 as example because this is the average amount of unsecured debt that our clients come into our office seeking relief from. We find that the average monthly minimum payment that our clients are paying each month on this amount of debt adds up to nearly $1,100.00 a month.

If you take a step back from this debt you realize that, for the same price to pay on the minimum payments each month, a bankruptcy case can be filed. This issue is very concerning for me because often our clients do not want to spend $1,500.00 for a fee to resolve their debt, however, they find it ok to continue to pay almost the same amount to their credit card companies while struggling each month to pay their basic utilities or put food on the table for their children.

Bankruptcy was designed to help Debtors deal with their debt so that they do not have to make the choice of paying for food or paying their credit cards. Mr. Ellis' article fails to address the value that a bankruptcy case can bring to a Debtor. Instead, he wants us all to believe that it is too expensive for Debtors to even think about filing. This is very dangerous.

The reason this is dangerous is because it gives Debtors the idea that they cannot file, which is simply inaccurate. If Debtors do not file when they should, they could suffer a lifetime of creditors always coming to collect against them, court judgments, and bad credit. Bankruptcy was designed to allow people who fall on hard times to protect themselves from collections, court judgments, and bad credit for life. Debtors can turn their whole lives around in only three months in a Chapter 7 case or three to five years in a Chapter 13 case.

Our firm works with Debtors when it comes to fees. We understand that Debtors may not be able to pay a full fee immediately. We often set fees arrangements based upon what our client can pay each month. Most of our clients realize that once they eliminate high monthly payments, which go mostly to interest on credit cards, they have the ability to live on their income without the need of credit cards and can afford the fee to pay for a bankruptcy case.

My major concern with Mr. Ellis' article is that it misses the practical point of bankruptcy and the benefits that should never be overlooked. Yes, it does cost some money to complete a bankruptcy cases with an attorney, but the amount is affordable and no one should use a price for services to deter people from getting a fresh start with a bankruptcy case.