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Is Chapter 7 bankruptcy advice held back from some?

A recently published article takes a disturbing look at how bankruptcy services are made available to individuals who are in dire financial straits, and the picture that is painted is one of unfair treatment toward African Americans. The report focused on how African American residents in one Tennessee city were not counseled on their options when looking for bankruptcy services. In many cases, consumers ended up filing for Chapter 13, when Chapter 7 bankruptcy would have provided far better relief.

At the heart of the issue is how some Memphis residents are so desperate for debt relief that they are placed in a position where any financial relief is better than none at all. With their backs up against a financial wall, many of the city's poorest African American residents turn to companies offering to file a bankruptcy for a flat fee. In some cases, there is no up-front cost, and payments are accepted over a period of time.

As might be expected, those legal services provide very little in the way of service. Many of the people who file are given no guidance as to their bankruptcy options. That leaves some with a Chapter 13 case, even if they have no assets that would benefit from debt restructuring. In fact, many never even complete the bankruptcy process, and their cases simply expire.

Chapter 7 bankruptcy can be a powerful resource for debt relief, when used in an appropriate manner. Any Tennessee resident should expect to receive counseling on their options when they set out to work with a bankruptcy attorney, no matter their personal or financial circumstances. Any offer of a fast and easy filing for an up-front fee should be approached with a critical eye. Very often, these "services" do little to assist in debt reduction, and can leave a consumer worse off than when they started the process.   

Source: motherjones.com, "How the Bankruptcy System Is Failing Black Americans", Paul Kiel and Hannah Fresques, Sept. 28, 2017

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