Part VI of XI
Written by Beckett Cantley and Geoffrey C. Dietrich
This article follows the outline contained in Part I, which can be read at www.cantleydietrich.com.
The BAPCPA also provided more protection to creditors by expanding certain exceptions to discharge. For instance, the amount of cash advances that would give rise to a presumption of fraud in the use of credit cards was reduced under the BAPCPA, from $1,225 to $750, thereby expanding a major exception to discharge of credit card debt.
Post-BAPCPA fee studies have estimated a 24% increase in the total costs to consumers that have Chapter 13 cases dismissed. In other words, consumers who get no debt relief since there case is dismissed during the 3-5 year repayment period are paying 24% more to get no benefit. Post-BAPCPA fee studies have estimated a 27% increase in the total costs to consumers that have Chapter 13 cases discharged. This means that Chapter 13 debtors who actually accomplish the ultimate goal of bankruptcy—a discharge of debt—have incurred a 27% increase in total cost to the consumer for obtaining such discharge.
The BAPCPA increases the amount of paperwork involved in filing and imposes the potential of attorney liability for inaccuracies, thereby increasing bankruptcy attorney fees. The post-BAPCPA national mean for Chapter 13 attorney fees increased 24% in comparison to the pre-BAPCPA national mean. 87.3% of bankruptcy attorneys increased their total fees for Chapter 13 cases, following the BAPCPA taking effect. 69% of bankruptcy attorneys increased their pre-petition fees in Chapter 13 cases, following the BAPCPA taking effect. 34% of bankruptcy attorneys have even raised pre-petition Chapter 13 fees by 100% or more post-BAPCPA. The substantial majority of bankruptcy attorneys polled who decided to raise pre-petition Chapter 13 fees, due to the BAPCPA provisions, did so by either 50% or 100% of their pre-BAPCPA Chapter 13 pre-petition fees. Post-BAPCPA total fees for Chapter 13 cases typically range from $1500 to $5000, depending on the jurisdiction and lawyer’s skill. The median post-BAPCPA Chapter 13 total fee was reported to by $2650. The post-BAPCPA Chapter 13 attorney fee is, on average and holding all other factors constant, $564 higher in real terms.
Post-BAPCPA fee studies have estimated a 37% increase in the total costs to consumers that have Chapter 7 “asset” cases discharged. Post-BAPCPA fee studies have estimated a 51% increase in the total costs to consumers that have Chapter 7 “no asset” cases discharged. The post-BAPCPA national mean Chapter 7 “asset” case attorney fee increased 30% in comparison to the pre-BAPCPA national mean. The Post-BAPCPA national mean Chapter 7 “no asset” case attorney fee increased 48% in comparison to the pre-BAPCPA national mean—from $654 to $968. The state with the highest average post-BAPCPA Chapter 7 attorney fee is Arizona, with an average of $1,530. Idaho averaged the lowest post-BAPCPA Chapter 7 attorney fee, at $692. The largest post-BAPCPA state mean Ch 7 attorney fee increase, as compared to pre-BAPCPA levels, was found in Montana, at an astonishing 90% increase. Vermont registered the smallest percentage rate increase of post-BAPCPA Chapter 7 attorney fees, at a mere 10%. The post-BAPCPA Chapter 7 attorney fee is, on average and holding all other factors constant, $258 higher in real terms.
Additional expense and administrative burdens imposed under the BAPCPA did not lead to as sharp a rise in pro se bankruptcy petition filings as some commentators initially predicted. The IFP filing fee waiver provided to certain qualified Chapter 7 debtors under the BAPCPA may have mitigated the impact that increases in other expenses otherwise may have had on post-BAPCPA Chapter 7 pro se filing levels. The percentage of Chapter 7 filers who obtain an IFP filing fee waiver is still relatively low, at a mere 1.9% of all Chapter 7 filings; however, Chapter 7 filers granted a fee waiver garner a discharge of debt over 70% of the time. It is still a little too early to tell whether the IFP fee waiver has or will sufficiently mitigate the disparate effect upon the poor of other total cost increases mandated under the BAPCPA (discussed below).
Lois Lupica’s study also noted that a slight drop in pro bono bankruptcy representation occurred post-BAPCPA. This drop in pro bono representation was likely a product of increased administrative burdens and paperwork, as well as an increase in the personal liability of attorneys, regardless of whether or not such attorney is paid for their services, for misrepresentations of debtors financial circumstances.
This is the sixth of eleven installments of this article. The entire article may be found at www.cantleydietrich.com.
