Press release from the National Association of Consumer Bankruptcy Attorneys –

NACBA ANNOUNCES FREE INITIAL CONSULTATIONS WITH CONSUMERS TO KEEP BANKRUPTCY AVAILABLE, JOINS CFA IN OPPOSING 4^TH BANKRUPTCY FILING FEE HIKE IN LESS THAN A YEAR

New Jump in Fees Now Before Congress Would Mean a Doubling in Filing Costs in Under 12 Months; Congress Urged to Reallocate Existing Funds to Get Additional Money to Trustees.

WASHINGTON, D.C.//July 13, 2006//As it joined the Consumer Federation of America (CFA) in opposing a Capitol Hill proposal for the fourth increase in bankruptcy filing fees in under a year, the National Association of Consumer Bankruptcy Attorneys (NACBA) announced today that it is encouraging all 3,300 of its attorney members to offer free consultation sessions with consumers in order to ensure that bankruptcy remains available and affordable to those in need.

NACBA leaders are taking this voluntary step as part of their response to a measure now being considered by Congress that would result in a cumulative 110 percent increase in bankruptcy filing costs beginning with the date the controversial federal bankruptcy reform law went into effect on October 17, 2005.

Congress is now considering a measure to raise the filing fee for chapter 7 bankruptcy filings by another $40, with the proposed fee increase coming on top of three previous fee increases that already had escalated bankruptcy filing costs by 90 percent. The earlier increases included a hike in the basic filing fee and costs associated with the Congressionally-mandated credit counseling and debtor education requirements imposed on all bankruptcy filers, regardless of the circumstances forcing them into bankruptcy. The purpose of the proposed $40 increase is to raise the compensation level for chapter 7 trustees.

Even before this fourth increase was proposed, the federally mandated cost of bankruptcy filing already had jumped a whopping 90 percent – from $209 to $399 – since April 2005.  Congress increased the cost of filing under the new bankruptcy law passed in April 2005,  then further increased the fees in May 2005 under an emergency spending bill, and then did so for a third time in February 2006 in the Budget Deficit Reduction Act (even while reducing taxes on wealthy Americans). The proposed fourth increase in fees would boost the federally required filing costs to $439 – a jump of 110 percent from the initial level of $209.

Bankruptcy Attorney Ike Shulman of San Jose, CA, said: “When Congress passed the new law, they increased the filing fees. So, why didn’t that increase go to Chapter 7 trustees? Rather than further burden cash-strapped debtors by piling on yet another fee, Congress should determine where all the money now going into the bankruptcy system is being spent and reallocate the existing revenue so that chapter 7 trustees are adequately compensated.   In the mean time, NACBA members are going to do everything they can to keep bankruptcy as affordable as possible. We are encouraging all of our members to take the voluntary step of free initial consultation sessions to do our part to hold down the costs for America’s worst-off consumers.”

Consumer Federation of America Legislative Director Travis Plunkett said:  “Consumers are already coping with dozens of new barriers to bankruptcy under the new law.  If Congress hikes filing fees yet again, it will likely make a fresh start in bankruptcy unaffordable for some Americans who have experienced genuine financial misfortune.  We have no objection to increasing compensation for Chapter 7 trustees, but we do object to consumers shouldering another financial burden for this pay increase.  Before Congress raises bankruptcy filing fees again, it should determine how the funds generated by the previous three fee increases have been spent and whether access to bankruptcy has been reduced.”

Bankruptcy Attorney Carey Ebert, Hurst, TX, who also serves as a Chapter 7 trustee, said: “The new bankruptcy law placed a huge burden on not only debtors and debtor’s attorneys, but Chapter 7 Trustees as well.  However, it is not equitable, fair or reasonable to place another tax on those least able to pay to fund this legislation.  The filing fee alone has increased almost $100 since the new law took effect on October 17^th.   Of course, none of the increase was directed to Chapter 7 Trustees fees.  By allowing an additional increase, Congress would simply be imposing an additional tax on debtors that cannot afford to pay it.  Bankruptcy should be available to all those in need.”

NACBA and CFA are concerned that there may be even more bad news for bankruptcy filers around the corner if credit counseling firms succeed in imposing what would be the fifth increase through higher fees for front-end credit counseling and later debtor education – both of which are mandated by Congress under the new law. 

ABOUT NACBA

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 more than 3300 members located in all 50 states and Puerto Rico.  NACBA is on the Web at http://www.nacba.org.

CONTACT:  Patrick Mitchell, (703) 276-3266 or pmitchell@hastingsgroup.com.

EDITOR’S NOTE: A streaming audio replay of the news event will be available on the Web at http://www.nacba.org as of 3 p.m. ET on July 13, 2006.