Professor Bob Lawless recently spoke with Bloomberg BNA about the inefficiency of the current bankruptcy system. Consumers facing bankruptcy are often enticed by the "no money down" component of filing Chapter 13 bankruptcy vs. Chapter 7, which requires immediate payment of attorney's fees. However, a recent national study suggests that Chapter 13 filers pay $2,000 more and have their cases dismissed at a rate 18 times higher than if they had filed Chapter 7.

Researchers who have been studying people who file Chapters 7 and 13 in a long-term consumer bankruptcy research project recently released a report entitled "'No Money Down' Bankruptcy." Authors Lawless, Pamela Foohey, Katherine Porter and Deborah Thorne raise questions about how people access the bankruptcy system and the extent of the benefits they get from it.

The purpose of the report isn’t to criticize or point fingers at bankruptcy attorneys who are the "gatekeepers" to the system, but to "open up a conversation about what will make the bankruptcy system more effective for the stakeholders in it," Lawless told Bloomberg BNA March 8.

Stakeholders include attorneys, judges, advocates, trustees and debtors, he said.

The empirical data from the study is a national random sample and shows patterns across the entire country, Lawless said.

Full story at Bloomberg BNA