NACBA issued the following press release today. The report, “Bankruptcy Reform: Dollar Costs Associated with the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005,” can be accessed at

Barbara Andelman, Executive Director



So-Called “Bankruptcy Reform? Law Raised Overall Costs to Consumers by 60 Percent, While Failing to Achieve Stated Objectives.

WASHINGTON, D.C.//July 30, 2008//A new U.S. Government Accountability Office (GAO) report issued this week shows that the 2005 federal law change undermining bankruptcy law protections for Americans increased by $556 (about 60 percent) the costs of a Chapter 7 filing, according to the National Association of Consumer Bankruptcy Attorneys (NACBA).

NACBA warned Congress before the law was passed that the statutory changes would needlessly hike up costs for the consumers who are least able to pay more, and at a time when bankruptcy is urgently necessary for many more people. Even before the current home mortgage foreclosure crisis exploded, bankruptcy attorneys argued since 2006 that a sharp rise in the need for bankruptcy filings was imminent – exactly the opposite of what proponents of the 2005 law said would happen.

In fact, Chapter 7 and Chapter 13 filings totaled 822,590 in 2007 – up 38 percent from the previous year. That trend has picked up more steam in 2008, with the American Bankruptcy Institute reporting that bankruptcy filings in the first quarter of 2008 jumped 27 percent from the same quarter in 2007.

Philadelphia bankruptcy attorney and NACBA President Henry Sommer said: “What we now see in the smoking ruins of the 2005 bankruptcy ‘reform’ law is a colossal failure twice over. The GAO study shows that the law sharply increased the costs of bankruptcy. Further, bankruptcy numbers have been rising steadily since 2006 with the current situation being one in which all too many Americans suffering through the home mortgage crisis find themselves stripped of key protections that Congress removed in 2005. It is hard to imagine how the 2005 law could have been engineered to do more harm to consumers than we now know to be the case.”

Released on July 28, 2008, the GAO report, “Bankruptcy Reform: Dollar Costs Associated with the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005″ finds that costs are now considerably higher for those filing bankruptcy. For example, the report puts the reason for the resulting higher attorney costs squarely at the door of the 2005 law, noting: “… significantly more legal work is required to meet the requirements of the law.”

The GAO report also states: “Based on a random sample of bankruptcy files, GAO estimated that the average attorney fee for a Chapter 7 case increased from $712 in February -March 2005 to $1,078 in February-March 2007. For Chapter 13 cases …in more than half the cases the increase was 55 percent or more. .. As a result of the act and subsequent budget legislation, total bankruptcy filing fees have risen from $209 to $299 for a Chapter 7 and from $194 to $274 for a Chapter 13. …In addition, fees to meet the act’s credit counseling and debtor education requirements are typically about $100.”

The result: Hundreds of thousands of Americans facing the current financial crisis find themselves priced out of bankruptcy relief. The NACBA calculation of a roughly 60 percent increase documented in the report is based on the following: $921 for total average costs for a Chapter 7 filing before the 2005 law ($712 for attorney fees, $209 court filing fee, and $0 for mandatory credit counseling/debtor education) versus $1,477 for total average costs for the same type of filing after the 2005 law ($1,078 for attorneys fee, $299 for court filings, and $100 mandatory credit counseling/debtor education).

For the complete GAO report, go to on the web.


The National Association of Consumer Bankruptcy Attorneys ( is the only national organization dedicated to serving the needs of consumer bankruptcy attorneys and protecting the rights of consumer debtors in bankruptcy. Formed in 1992, NACBA now has 3000 members located in all 50 states and Puerto Rico.

Bankruptcy Lawyers: New Law Increased Costs, Doesn’t Deliver

J Thomas Black
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Board Certified, Consumer Bankruptcy Law- Texas Board of Legal Specialization