People currently filing for Chapter 7 and Chapter 13 consumer bankruptcy protection are facing as much as a 55 percent cost increase as one result of the 2005 comprehensive bankruptcy reforms, says a new study published in the American Bankruptcy Institute Law Review.

In addition, as a direct result of these increased costs, unsecured creditors are being paid a smaller percentage on the dollar today than prior to the 2005 reform, the data show.

The study was authored by New York bankruptcy attorney Lois R. Lupica, of Thompson & Knight LLP, a big Dallas-based law firm, and funded by the American Bankruptcy Institute (ABI) and the National Conference of Bankruptcy Judges (NCBJ).

Lupica says consumer bankruptcy is a "far more complicated process than it was before the 2005 amendments," based on an increased number of conditions and calculations for filers, in addition to a corresponding rise in expenses.

"The government's stated goal in passing bankruptcy reform was to eliminate abuse of the system and create a set of higher eligibility standards for consumers, but this is the first time that the financial impact of those standards has been quantified," claims Lupica. In addition to her responsibilities at the law firm, she serves as a Maine Law Foundation Professor of Law at the University of Maine School of Law, in Portland.

The study examined data collected from consumer bankruptcy cases in judicial districts located in Florida, Illinois, Georgia, Maine, Utah, and West Virginia. The costs to consumers were defined as debtor's attorney fees and expenses, trustee fees and expenses, filing fees, credit-counseling and debtor-education fees, and any other professional fees.

For the sample of Chapter 13 cases, the study found that the median cost for consumers was $4,077 in 2007 and 2008, up from $2,930 in 2003 and 2004. For Chapter 7 cases in the same periods, the costs increased to $1,399 from $900.

"Attorney fees are just part of the required administrative expenses that may have contributed to the overall decline of consumer bankruptcies, even in the face of the public's increased debt load, foreclosures, and loan defaults," Lupica says.

While the overall number of consumer bankruptcy filings has declined since passage of the 2005 reforms, the most recently available data reported by ABI shows that the 149,268 consumer bankruptcies filed in March 2010 represented the highest monthly total of consumer filings since the reforms were enacted. The March filing total represented a 34 percent increase from the February filing total of 111,693 and a 23 percent increase from the March 2009 total of 121,413.

"Greater upfront costs may have hindered some consumers from filing bankruptcy, but there may be other factors at play," Lupica says. "There was a large volume of negative publicity in the aftermath of the 2005 amendments, as well as heightened efforts by aggressive debt collection and consolidation firms."

The publication of the study marks completion of the first phase of a two-part national survey to analyze how the consumer bankruptcy system has changed in the past five years. The full study is scheduled to be published in late 2011.