Bankruptcy fees going up again

According to local Attorney Scott F. Humble, effective June 1 the bankruptcy court filing fee for Chapter 7 is increasing from $306 to $335 and the filing fee for Chapter 13 is increasing from $281 to $310.

This is particularly negatively effects for people with financial problems, and at or near poverty, in the Southern Tier and north western Pennsylvania. Humble has spoken to thousands of people since the economy collapsed that would be much better off by filing bankruptcy but could not afford the fees to file. With filing fees going up, that makes this situation even worse. Humble credits this to the changes in the bankruptcy law that went into effect Oct. 14, 2005 and that the wages in the area are suppressed.

In Humbles’s opinion, the title of Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“BAPCPA”) is totally misleading.

“It was written by creditors for creditors. It makes no real attempt to help consumers at all. In fact, it adds additional costs and responsibilities for the consumer, as well as, their attorney. The law is laced with traps and extra duties that literally priced many people out of the market of filing for bankruptcy court protection. The filing fee price increase will only make it worse for those that are less fortunate,” he said.

Attorney Humble added, that still holds true even though we have not raised our base attorney’s fees since ‘BAPCPA” went into effect in 2005.

Humble continues by stating that, contrary to popular belief, individuals in the Chautauqua County area do everything financially possible before coming to see him. Moreover, the three major reasons for filing are loss of income, injury, divorce or separation. In any event, these are life events beyond one’s control. One, or any combination of these covers more than 95 percent of his clientele. Another small percentage have to do with surrendering a “lemon” vehicle or house and even exorbitant student loans.

“Most of the time, people should come in for a free no obligation consultation before getting a second or third mortgage or a loan against their retirement so they can make a fully informed decision before doing something that lasts for years and is irreversible,” he said. “Many times, they give away their future and end up filing a bankruptcy in any event.”

There are even people that fall for a scam call “debt reduction.” The first clue that it is a scam is that they are located hundred if not thousands of miles away. So you have no recourse when they do you wrong. Second, they charge an exorbitant percentage for their fee before they do anything, and it is normally taken directly from the consumer’s bank account.

“You should never give a stranger access to your bank account. They can’t help with taxes, mortgage arrears or restructuring vehicle loans like bankruptcy,” Humbe said. “What normally happens is that their fee is so big that by the time they could negotiate the smallest debt, the consumer is getting sued on the larger debt; and if the consumer has real estate, most of the time it becomes a lien on any real estate in the consumer’s name; and with a judgment they can pursue all the other collection techniques such as a bank account freeze, sheriff sale, and wage garnishment. Moreover, they neglect to mention the income taxes that you must pay on any debt that is forgiven. We advocate for fully informed consumers.”

Additionally, consumers should realize that they will be going to a court close to home and not Buffalo or Pittsburgh. For example, if you live in Chautauqua County you will go to bankruptcy court in Mayville; in Cattaraugus County in Olean, and in Warren County in Warren for Chapter 7 and Erie for Chapter 13.

“Highering a Buffalo attorney for example is generally more expensive, you don’t even meet the person in the ad, most business is done over the phone, follow up is very difficult, and they usually never come to court themselves and hire a local attorney to appear for them at our local courts,” Humble said.

Locally, for the last 25 years, Humble meets with his clients personally from the beginning, he has no computer phone system, you talk to a person when you call, and he stays with a client throughout the whole process up to and after court. Furthermore, he accepts payment plans to help out his clients.

“Unfortunately, the higher filing fee will have a more dramatic effect on those of us who are less fortunate. On the positive side, it is best to get educated locally before you act; shop locally regarding your financial problems; and if it sounds to good to be true (i.e. debt consolidation) it is,” he added.