4th boost sought for bankruptcy filing fee

7/19/2006

For the fourth time in less than a year, Congress has proposed increasing fees for filing bankruptcy, raising the ire of consumer advocates.

"The upshot here is yet another fee increase would likely block many people from filing bankruptcy who have suffered genuine financial misfortune," said Travis Plunkett, legislative director for the Consumer Federation of America.

Congress is considering a measure to raise the fee for filing Chapter 7 bankruptcy by $40, to $439. That compares with $209 before a federal reform law took effect in October. Since, increases have pushed the fee to $399, which includes roughly $100 for mandatory credit counseling and personal-finance classes.

The proposed extra money is to better compensate Chapter 7 trustees, who are appointed by the court to investigate the filers' assets, meet with and pay creditors, and oversee bankruptcy sales.

"The case load may have dropped, but the work load is significantly higher for the case trustee than prior to October," said Toledo attorney Patricia Kovacs, a Chapter 7 trustee.

Chapter 7 is for consumers who have little or no assets and who can't pay creditors, with the average income typically just above $20,000. It erases most debts.

The proposal before Congress would increase fees from $60 to $100 for no-asset cases, which make up the majority of personal bankruptcy filings. In asset cases, the trustees also get a percentage of the assets distributed to creditors.

But at issue is how the extra money would be collected. "We don't object to the trustees being fairly compensated for their work, but we don't think the debtor should shoulder the burden," said Maureen Thompson, a spokesman for the National Association of Consumer Bankruptcy Attorneys.

Ms. Kovacs, the Chapter 7 trustee, said the problem is not with the current proposed increase but with two that were previously passed: $20 for tsunami relief and $25 in April for federal deficit reduction.

Louis Yoppolo, a Chapter 7 trustee in Toledo, said the best scenario would to raise trustee fees by reallocation, rather than adding to debtors' bills.

"One might question the wisdom of having debtors take on this burden since that's not the segment of our society that's in the best position to [do that]," he said.

Contact Mary-Beth McLaughlin at

mmclaughlin@theblade.com

or 419-724-6199.