Fellow professionals - please do what is right for your client in the short and long term. Do not set them up for failure just to get a deal done. Get the deal done if it is meant to be so that you have a client for life.
Due to rising debt and falling home values, Minnesotans are filing for Chapter 7 or Chapter 13 protection from creditors in far larger numbers than last year. It has increased 60% so far this year, compared with the same period in 2006. Nationally, bankruptcy filings rose 66% during the first 3 months of 2007. BUT, they are nowhere near the totals in the years that proceeded the change in bankruptcy laws.
These numbers may appear worse than they are due to the aftermath of sweeping changes in federal bk laws that took effect in the fall of 2005. Because of those changes, the number of filings were the lowest in years.
What is really weird about all this is that filing bankruptcy for the lowest-income people isn't happening because they can't afford to pay a lawyer. The standard fees in Minnesota for a lawyer to file a case is close to $2,000 - more than double the rate before the new law took effect. They estimate that a third of the cases that normally would file are not filing because it is too expensive.
In past years, the most often-cited reason behind bankruptcy filings were layoffs, divorces or unexpected medical bills. The mortgage market now leads the list. One in every three or four people file for bankruptcy because of mortgage foreclosures or ARMs where their payments are up significantly.
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