Bled white and destroyed by Barack Obama’s “hope and change,” hundreds of thousands of Americans have been forced to use tax refunds to pay the filing costs of their bankruptcies. The National Bureau of Economic Research (NBER) reports that bankruptcy lawyers have seen an increase in personal bankruptcies filings which follow this pattern: many clients are filing bankruptcy soon after receiving their tax refunds.
This has been especially true since a law passed in 2005 made bankruptcy more costly and more difficult. For some people, in Barack Obama’s upside down America, as fast as money comes in, it goes to buy a bankruptcy file number. There are no plans for vacations or buying a new car for many people. As one bankruptcy lawyer explained the situation, “If people are expecting a big refund, they go as fast as they can to a tax preparer. They need the money so they can afford to file for bankruptcy.”
Filing costs that averaged around $ 921.00 before the law now cost most filers $1477 if not more. Of course, as usual, the big winners from this law are lawyers who get to charge higher fees based on more time spent to verify the facts presented by the individual seeking relief. The changes in the law were made to combat fraud, which is a worthy goal, but raising the filing fees has resulted in punishing many legitimate people who only want to have their debts cancelled so they can go on with their lives.
The NBER report’s author argues “…. if you want to curtail abuse, raising the cost is not a good way to do it. The people who really need bankruptcy are the ones who will be unable to pay for the fees.”
While it is true that there have been fewer bankruptcies since the new law went into effect, that is not necessarily a good thing. There has been little tangible benefit from the new rules for society in general, and many who need bankruptcy are denied discharge of their debts. Welcome to Obama’s upside-down America.
Photo Credit: Geoff Livingston (Creative Commons)
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