On behalf of Law Offices of Mark M. Kratter, LLC on April 19, 2012
In 2005, the U.S. bankruptcy laws were changed so as to prevent abuse of the process. That is, the change in the law was meant to prohibit those who could afford to pay their debt from filing for bankruptcy. However, one unfortunate consequence of the 2005 reforms is that it made filing for bankruptcy more expensive.
Although it may strike some Connecticut residents as surprising, it does cost money to file for bankruptcy. As a result of the increase, which put filing costs at about $1,477 as of 2007, more and more people have been using their tax returns to get started. As the average tax refund was $2,913 last year, the refund may more than cover the filing costs. What that also means, though, is that there is often a spike in filings around this time of year.
As many people in Connecticut and across the country prepare to file for bankruptcy, it's important to know that, while bankruptcy can seem scary, for many it is a good way to reorganize finances and get back on track. Depending on your income level and what you can afford, you will likely file for either Chapter 13 or Chapter 7.
Chapter 13 includes a repayment plan while discharging some debts, and Chapter 7 involves discharging most debts and includes liquidating some assets. Aside from those benefits, bankruptcy can halt a foreclosure and put an immediate end to harassing phone calls from creditors, allowing you to focus on your getting your finances back on track.
Source: CNBC, "Tax Refunds Being Used to Pay for Bankruptcy Filings," Christine Dugas, April 13, 2012
