Chapter 7 Success Lawyers Chicago - Commentary: Chapter 7 Bankruptcy Post-Reform

Commentary: Chapter 7 Bankruptcy
Post-Reform

Chapter 7 bankruptcy never did go away. It simply was supplemented with additional requirements to burden a debtor and his attorney. For example, a Chapter 7 trustee can no longer view the information in the debtor’s petition as truthful. This is despite the fact that the information is provided and signed under oath, subject to all the penalties that are available for perjury cases.

The chapter 7 trustee now must review two months worth of pay advices. This can be in the form of paychecks, bank statements, retirement benefit statements or an affidavit to the effect that the debtor does not have any pay advices. In most cases, the trustees are not even questioning the information in the pay advices. The trustee has no incentive to object to the debtor’s bankruptcy case. The trustee is currently being paid $60.00 per chapter 7 case. That is the same fee that they were receiving prior to the bankruptcy law reform. Thus, the trustee is not being compensated at all for the additional work or review that must be done.

Further, a debtor must provide a copy of his latest year’s federal tax return. I had thought that this issue would cause a big roadblock for debtors. Surprisingly, most debtors have actually filed their taxes. There is no cottage industry developing for accountants to assist prospective debtors with filing their taxes. In fact, the real burden is on the Internal Revenue Service. The IRS is being inundated with requests for the debtor’s tax transcript. These transcripts have to be retrieved and mailed all at taxpayer expense. It is unclear what the net cost of that service can run. I would venture to say that the IRS is not benefiting from the new law requirement that proof of tax filing be submitted.

Lastly, and most importantly, the credit counseling requirements have served absolutely no purpose. A debtor who has visited an attorney for bankruptcy filing is interested in filing bankruptcy. Credit counseling is not changing that mentality. Further, the process for obtaining a certificate of credit counseling is nothing more than a data entry session on line or a question and answer session over the telephone or in person. There is no actual credit counseling being performed.

Basically, the requirements are very manageable with the guidance of an experienced bankruptcy attorney. The additional requirements have not deterred honest debtors. If someone is deep into debt, they would likely follow a dozen steps to gain a fresh start. That is what Chapter 7 bankruptcy was meant to do. It still can and does; however, all parties involved must do more to accomplish that task.

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