Consumer Bankruptcy News reports in a January article that the changes made to the Bankruptcy Code in 2005 (known as BAPCPA) significantly increased the cost of filing for bankruptcy for consumer debtors without producing a statistically significant increase in creditor recoveries, according to a recent study cited in the article.
Lois R. Lupica, Maine Law Foundation Professor of Law at the University of Maine School of Law measured the impact of BAPCPA by looking at what it cost a consumer to file for bankruptcy before and after the changes took effect. Her data came from a random sample of over 11,000 cases between 2003 and 2009.
The study found that the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 hit no-asset Chapter 7 debtors the hardest with their out-of-pocket costs increasing by an average of over 50%. Chapter 13 filers saw over a 20% increase.
Lupica also developed a body of data to answer the 'why' question. She conducted focus groups over the next 18 months, made up of consumer debtor attorneys, trustees and judges. She says that those folks repeatedly observed a disconnect between the time it takes to responsibly represent a consumer debtor in a Chapter 7 case and the legal fee. Because of the complexities added by BAPCPA and attempts by the courts to work around some of the changes, they reported that there are few simple cases any more.
"It takes more skill and experience to responsibly and professionally represent consumer debtors - especially in this economic climate - than it used to. There is a greater need to have a nuanced understanding of the dissonance between how the system is designed to work in theory and how it works in practice. Lawyers consistently report working harder that ever before and experiencing higher stress levels that they directly attribute to practicing in the new consumer bankruptcy environment," Lupica reported.
"Moreover, the system is less tolerant of mistakes and yet there are so many more opportunities presented by BAPCPA for even seasoned attorneys to make errors . . . Efficiency coupled with a high level of skill, while important in every area of law practice, is crucial to the success of a consumer bankruptcy practice. 'Best practices' for consumer bankruptcy lawyers requires finding a balance between comprehensively addressing a financially distressed client's interests and doing so in a time sensitive and efficient manner."
(Thank You to Consumer Bankruptcy News for the information used for this article.)
