Part VII 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.
Post-BAPCPA fee studies have also analyzed pro se filing statistics to determine whether a viable low cost alternative actually exists. One study found that only two percent of all post-BAPCPA Chapter 13 cases were filed pro se. Another study found that pro se filings represented 10% of all Chapter 13 cases filed in 2011, representing roughly a 180% increase from pro se filing levels in existence at the time of the BAPCPA’s enactment. Of the 2% cited by Lois Lupica’s study, all were filed with a petition preparer’s assistance and none ended in discharge. Lois Lupica’s study also found that only 5.8% of all post-BAPCPA Chapter 7 cases were filed pro se. Another study found that pro se filings represented 8% of all Chapter 7 cases filed in 2011, representing roughly a 200% increase from pro se filing levels in existence at the time of the BAPCPA’s enactment. Of the Chapter 7 “asset” cases filed pro se, 75% were filed with the assistance of a petition preparer. Of the Chapter 7 “no asset” cases filed pro se, 97.8% were filed with the assistance of a petition preparer. The cost of consulting with a petition preparer when filing pro se is roughly $180. Chapter 7 pro se filers faced a pre-BAPCPA dismissal rate of 5.69%. On the other hand, Chapter 7 pro se filers face a post-BAPCPA dismissal rate of 17.62%.
These figures show an obvious trend towards increases in pro se filings, increases in pro se petitions filed with petition preparer’s assistance (with the requisite $180 cost, on average), and increases in the rate of dismissal of pro se debtors’ cases prior to such debtor receiving a discharge of debt. These trends, if they continue, may further diminish the viability of pro se bankruptcy filings as a low-cost alternative for debtors with little means.
Contrary to the belief of many members of Congress, bankruptcy is not merely a middle-class issue. In fact, a 2009 study of the BAPCPA’s impact upon the poor showed that one-third of all bankruptcies are filed by individuals whose income is below the poverty line, even though the BAPCPA had already imposed several procedural and substantive impediments for many potential low-income filers by the time this study was taken.
To make matters worse, many low-income filers in this one-third are so mired in poverty—with no substantial income or assets—that they gain little advantage from filing for bankruptcy. These types of truly impoverished filers generally only discharge debts that creditors would have been unable to collect in any event. Some debtors with above-median income, but small or non-existent mortgages and car notes, even end up paying a greater amount to pre-filing debtors, under Chapter 13 repayment plans, than such debtor would have paid without filing bankruptcy, and sometimes do so without even obtaining a discharge of debt (See below, infra, for a more detailed examination of this problem). These additional, and presumptively unnecessary, bankruptcies drive up the number of filings, exacerbating the inefficiencies and increased costs imposed by the BAPCPA, while offering little benefit to the common good. These types of bankruptcies are often driven by greedy and unscrupulous attorneys and bankruptcy professionals, who advise clients to file bankruptcy, even if filing is not in the client’s best interest, merely to increase their own personal profits. Evidence suggests that some attorneys maximize profits by steering debtors into Chapter 13 bankruptcy, even when the debtors may be better served under Chapter 7 and/or the probability of a dismissal without discharge of debt under Chapter 13 is high. To illustrate, post-BAPCPA fee studies have estimated a 24% increase in the total costs to consumers that have Chapter 13 cases dismissed.
Perhaps the most significant contributors to the decrease in post-BAPCPA consumer filings are uncertainty and cost, which as previously stated, can have a particularly disparate impact on the filing levels of the poor and uneducated. Uncertainty among consumers surrounding the availability of bankruptcy after the BAPCPA likely spurred a “dash to the courthouse” prior to the BAPCPA’s effective date and probably persists among consumers in some form to this day.
This is the seventh of eleven installments of this article. The entire article may be found at www.cantleydietrich.com.
