Failure to save pay stubs can block bankruptcy eligibility

Dylan McCament of the Mount Vernon, OH News reports a large drop in filings there.

Local attorney Josh Brown said he’s noticed a huge drop in the number of people filing for bankruptcy after the law went into effect, but said the numbers are starting to bounce back.

“A lot of people have the misconception that they can’t file under the new law,” Brown said.

Local attorney D. Derk Demaree has had a similar experience.

“Things slowed down to a crawl,” he said. “They’re building up momentum again.”

He said he thinks people are aware that Chapter 7 bankruptcies are not as automatic as they used to be.

“There were a lot of people who normally I would have put them in a Chapter 7 and not thought twice about it,” Demaree said.

According to Demaree, the new laws can hold the attorneys responsible if their clients are dishonest about their personal information. Demaree said this has thrown fees wide open in some cases.

Although Brown has not seen more people funneled toward Chapter 13, he said filing for Chapter 7 has become more time-consuming and expensive. Filers have to pay for credit counseling and for a financial management class to get a discharge. The filing fee also increased. And, in general, the costs for an attorney, although these vary, also increased because the process takes more time now, Brown said.

Brown said debtors have to get a certificate verifying they successfully completed a credit counseling course before they can file. They are also required to keep their pay stubs from work for the last six months, but many don’t save the stubs. Brown said the information is required to find out whether the debtor qualifies under the means test.

Brown said Chapter 7 has not gone away; most people seeking a Chapter 7 still qualify.

“It takes more time to get a case ready,” he said. “Before (the law took effect) we could probably do everything in an hour or hour-and-a-half interview. Now the first interview alone takes an hour and a half, and there’s usually another follow-up interview that takes just as long.”

Brown said filers have to be more organized than in the past, with more documentation, but did say bankruptcy relief is still available for those who need it.