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Bankruptcy Filings Delayed Until Tax Refund Arrives

According to research from Washington University and two other schools.

A new study from , Columbia University and the University of Chicago suggests that people are using their income tax refund to file for bankrupcy.

According to the Huffington Post, bankrupcy filings increase after people receive their refunds. The issue: It costs money to file for bankruptcy and many Americans could not afford to pay fees necessary to file, write economists Tal Gross, Matthew Notowidigdo, and Wash U's Jialan Wang.

Wang and fellow researchers attributed the uptick to the passage of the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act. The law raised legal and administrative fees from an average of $921 to $1,477 and mandated the filer pay for credit counseling.

As a result, the number of bankruptcy filings fell by more than half, although they have since rebounded to near pre-2005 levels.

According to the St. Louis Business Journal, "the 2005 law assumed that rising bankruptcy levels were caused by abuse of the system by wealthy debtors, but the recession has caught many households in a rising tide of unemployment and foreclosure through no fault of their own.” Wang said in a statement. "According to our research, bankruptcy fees prevent the most financially distressed households from being able to file, and tens of thousands of households will have trouble saving up for bankruptcy in 2012.”

Steve Carman March 29, 2012 at 10:06 PM
Last year, over 1.5 million people filed for bankruptcy and this year may be even worse. In the past, consumers could use their credit cards to help keep them afloat when they were hurting financially. The problem now is consumer credit has shrunk and bankruptcy filings are surging back. If that’s not enough, consumers now owe more on their student loans than their credit cards. Student loans exceeded the $1 trillion mark this year for the first time ever. Consumers can no longer count on their home equity to bail them out due to property values falling and many consumers do not qualify to refinance. Often, Bankruptcy seems like the only option that can help consumers get a fresh start but this is a serious decision that will have a long-term impact on your personal finances and credit. It is important to know about other options for getting out of debt including Debt Management (also known as Consumer Credit Counseling) and Debt Settlement. Debt Relief Options of Frisco, Texas is a company that helps consumers reduce their unsecured debt and they are running a sweepstakes for a chance to win $100,000 to pay off someone’s debt and give them a fresh start! There are few requirements to qualify but there is no purchase to enter. The sweepstakes will run from March 1st through June 10th, 2012 and the winner will be announced by June 20th, 2012. Call to enter the sweepstakes at (888) 654-6425 or enter online at www.DROptions.com.

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