you can't make this stuff up folks - Tax Refunds Being Used for Bankruptcy Filings
truth is stranger than fiction ... from
(snip)"More than 200,000 money-strapped households will use their tax refunds this year to pay for bankruptcy filing and legal fees, says a new study by the National Bureau of Economic Research.
The NBER research confirms what bankruptcy lawyers have long known: At the first part of the year, when Americans receive their tax refunds, there almost always is a spike in personal bankruptcy filings.
But that has been especially true since the cost of bankruptcy soared after U.S. bankruptcy laws changed in 2005. And many more families have been forced to delay filing until they can afford to pay the fees, the NBER study says.
"If people are expecting a big refund, they go as fast as they can to a tax preparer," says Henry Sommer, a bankruptcy lawyer in Philadelphia. "They need the money so they can afford to file for bankruptcy."
The average cost of legal and administrative fees jumped from $921 in 2005, before the reform in the law, to $1,477 just two years later, the U.S. Government Accountability Office says.
The largest slice of the overall cost is attorney fees, because lawyers now must verify much more information in a case than they did before 2005, says Robert Lawless, law professor at the University of Illinois. "Like any other professional services, the longer something takes, the more it costs," he says."(snip)
(snip)"Those who have trouble saving money will delay filing for bankruptcy until they have a one-time cash infusion, such as tax rebates or tax refunds. Last year the average tax refund was $2,913, NBER says. That's enough for many Americans to file for bankruptcy.
Since the law changed, fewer people have filed for bankruptcy. But that doesn't necessarily mean that the change has curtailed abuse of the system. "It just means that financially distressed people are not necessarily getting the help they need," Lawless says."(snip)
Re: you can't make this stuff up folks - Tax Refunds Being Used for Bankruptcy Filing
In North Carolina, where bankruptcies are relatively rare because the state does not allow wage garnishment, a consumer Chapter 13 will cost $3,000 in legal fees. A consumer Chapter 7 will cost $800 in legal fees alone. So says the very good bankruptcy lawyer I hired to guide my company out of bankruptcy. (Of course, the debtor in possession in a business bankruptcy will pay much more. But, you get what you pay for.)
Z