The Best Kept Secret in American Law

By Jonathan Petts

Chapter 7 is one of the most powerful tools that Congress provides to transform the lives of Americans in financial distress. It improves balance sheets, emotions, mental outlook, and even credit scores in many cases.

So why were only half a million chapter 7s filed last year if 47 million Americans live under the federal poverty level and the same number have overdue credit card debt averaging nearly $16,000 per household? Why did far less than 5 percent of these financially distressed Americans invoke Chapter 7 relief?

Given the power of a Chapter 7 discharge, that percentage is absurdly small. But it’s been fairly consistent over the past decade.

Chapter 7, it would seem, is the best kept secret in American law.