brankruptcy

Americans Are Too Broke To Go Bankrupt

This year, hundreds of thousands of Americans are expected to be too broke to file for bankruptcy.

The average cost to file for Chapter 7 bankruptcy protection, the most common form of consumer bankruptcy, is more than $1,500, according to recent research submitted to the National Bureau of Economic Research.

As a result, anywhere between 200,000 and one million consumers are estimated to be unable to afford that steep cost this year.

The research, conducted by a group of professors from Columbia University, the University of Chicago and Washington University in St. Louis,examined how bankruptcy filings spiked after people received their tax rebates in previous years. They estimate that another 200,000 consumers, who would otherwise not have enough money to file, will use their tax refunds to pay for bankruptcy this year.

It becomes harder and harder to pay off the debt as interest payments get higher, so your debt grows larger and larger," said Jialan Wang, co-author of the report.

Among those fees is a charge of about $300 just for filing the paperwork with the federal court, while the rest typically goes to bankruptcy lawyers, said Wang.

And there are other expenses on top of that, including fees for mandatory pre-bankruptcy credit counseling and a pre-discharge debtor education course. These average about $85 altogether, according to a recent study sponsored by the American Bankruptcy Institute, she said.

That means many of the Americans who have seen their debt snowball out of control due to events like job loss, foreclosure or a medical emergency during the economic downturn are now left without their last financial lifeline, she said.

Source

When companies go bankrupt, a debt-equity swap is a fair and efficient solution. The analogous approach for Greece is to convert its current bonds into GDP-linked bonds. If Greece does well, its creditors will receive more of their money; if it does not, they will get less. Both sides would then have a powerful incentive to pursue pro-growth policies.
—  Joseph Stiglitz, ‘Reform of eurozone design and the policy frameworks that have resulted in the monetary union’s performance is crucial’, The Guardian