Roger Allison has too little money to go broke. For more than a year and a half, the 64-year-old has been paying $50 a month to a lawyer until he has enough saved to file for bankruptcy. That may not come until next year.

"It frustrates the living hell out of me," said Allison, who depends on about $1,300 a month in Social Security disability payments to get by. "What are my choices? I don't have any."

With jobs disappearing by the hundreds of thousands, home values cascading, health prices soaring and the cost of staples such as cereal on the rise, the finances of U.S. families are under more pressure than at any time in generations.

But because of laws enacted three years ago this month, bankruptcy -- the Everyman's bailout -- has become a costly and unavailable resort for many.

A wide array of bankruptcy experts -- from judges to trustees to academics and lawyers on both sides of the bankruptcy aisle -- say the law has largely been a failure. They believe the tougher standards have failed to deliver on promises, including lower interest rates and borrowing costs, while raising barriers to last-resort relief for many debt-strapped Americans.

Even worse, borrowers who have a harder time walking away from credit card and installment debt are more likely to default on their mortgages -- stoking the spreading home mortgage crisis, a recent study found.

How many promises were delivered?

"I don't think any of them were," said Nancy Dreher, chief judge of the U.S. Bankruptcy Court for the Minnesota District. "It's made more work for us in the court," she said. "It's made more work for the attorneys. It's made it harder on debtors."

To be sure, proponents of the overhaul point to success. The law was passed amid concerns that even in prosperous times the growing number of consumers filing -- 1.56 million in 2004 -- was steadily rising.

And while bankruptcies have grown each year since the reform passed, they're still significantly lower than pre-overhaul levels. This year's expected 1.1 million filings, while 34 percent more than last year, is on par with 1996 levels.

Peter Garuccio, spokesman for the American Bankers Association, says such statistics are a sign "the law is working." Before reform, "some consumers were choosing bankruptcy too casually," Garuccio said. But now "folks who can afford to pay back some of their obligations are, in fact, doing so."

But with the economy slumping and credit hard to come by, the chorus of critics of the overhaul is growing.

"I'm a little afraid we have foreclosed bankruptcy for those who need it most," said Bradley Halberstadt, a Minneapolis bankruptcy attorney who often represents lenders. "To foreclose bankruptcy release to those who need it is not a good outcome."

Not filing

After years of lobbying by banks, credit card companies and retailers, Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. The law ushered in the biggest changes to the modern bankruptcy code since the 1970s. Lenders argued changes were needed to curb abuses of people running up credit card debt then filing for bankruptcy to get them dismissed.

"Congress, under pressure from the credit industry, took a system that wasn't broken and didn't fix it," said Cass Weil, a Minneapolis bankruptcy attorney who has routinely represented companies trying to get borrowers to make good on debts. "If anything, they made it more difficult."

One of the main concerns among critics is the increased cost. Previously a bankruptcy filing cost about $500 to $600 in attorney's fees. After the law, because of increased paperwork and liabilities for attorneys, that fee more than tripled, with many attorneys now charging between $2,000 and $3,000. Minneapolis bankruptcy lawyer Curtis Walker has a line of invisible people at his door, among them Allison, who can't afford to file. They're not counted on anyone's official score card of the consequences of reform.

Take Brian and Lola Dornseld. Brian, a sales rep for Schwan's food delivery service who works largely on commission, has seen his income plummet as his customers cut back in the current economic downturn.

"I worked 14 hours yesterday and made $90," he said. And earlier this year, when Brian had heart bypass surgery, the Dornselds lost more than half their income for three months. They relied on credit cards and installment loans to put food on the table. The Maple Grove couple, who make about $50,000 a year, owe $40,000.

The Dornselds quit making payments on their credit cards and other debts in July and planned to file for bankruptcy.

"I felt a sense of relief," Lola said. Then they visited a lawyer and learned they had to have $1,800 up front to file. "The relief disappeared."

They know it may be well into next year before they have the full fee. Meanwhile, they've disconnected their telephone to avoid a flurry of calls from lenders who dial every day.

Cheaper to lose the house

Others question whether the law inadvertently contributed to the foreclosure crisis still sapping the American economy. Academics are starting to speculate that a sizable -- but uncalculated -- number of Americans have decided to walk away from their home through foreclosure, rather than try to salvage it through bankruptcy.

The revised law "reduced the ability of homeowners to use the bankruptcy code to restructure their finances and stay in their home," concluded a recent study by David Bernstein, a U.S. Treasury economist whose research was not prepared for the agency.

The forces behind falling home prices are complicated, of course. Consumer miscalculations about what they could afford, rising payments from adjustable-rate mortgages and outright fraud all played a part.

But Bernstein says the debt-ridden avoiding bankruptcy -- either because of its soaring cost or perceived new hurdles to qualify -- have raised the number of home foreclosures.

"Many households who might have sought the protection of the bankruptcy court under the old bankruptcy regime are now simply walking away from their financial obligations or choosing to sell their homes," he wrote.

Adding meaning

Under the new law, creditors were supposed to have more leverage forcing borrowers into Chapter 13, a form of bankruptcy where debtors end up paying off outstanding loans over a period of years. In Chapter 7, debtors leave bankruptcy with a clean slate.

In Minnesota during the first seven months of the year, Chapter 7 filings (7,760) outnumbered new Chapter 13 cases (1,469) by nearly five to one -- the same ratio as in the same period of 2005. In the first seven months of that year, 10,089 Chapter 7 cases overshadowed 1,957 Chapter 13 filings.

"One of the main goals was to shuttle more people into Chapter 13s," said Terri Running, a bankruptcy trustee since 2002. "We just didn't see that."

One of the key provisions was a formula -- the so-called means test -- to determine whether filers qualified to wipe their slates clean. Previously filers and bankruptcy judges had that latitude.

Anyone who during the previous six months earned less than Minnesota's median income -- about $46,000 last year for individuals or $84,000 for a family of four -- usually qualifies for walking away from most debts.

For people who make more than median, qualifying for Chapter 7 has more to do with income over the past six months than anything else. Expenses are set by Internal Revenue Service standards, from housing to cars to food, and have little to do with a filer's debt. Credit card debt, for example, isn't included. Nor are overdue health care bills. So after deducting living expenses, and calculating disposable income, a debtor may end up paying outstanding bills for up to five years.

The formula often has little to do with the economic reality debtors face, said U.S. Bankruptcy Judge Robert Kressel. For example, debtors with variable incomes, such as sales reps working on commission, what money they have on hand today is more important than what they had in their bank accounts six months ago, Kressel said.

"It uses not your real income and not your real expenses," he said. "It may or may not have any relationship to how much money you actually have to pay."

But even Chapter 7 has become more expensive. There used to be eight exceptions of debt that couldn't be released, including unpaid taxes and government-sponsored student loans. The revised law now lists 19, including divorce settlement, condominium association dues and private student loans.

Unkept promises

For average Americans, the promised benefits of the law haven't filtered down.

After the bill passed, Rep. David Dreier, R-Calif., estimated families would save an average $400 a year -- a figure repeated often by the credit card industry.

Credit card customers have been paying billions more to lenders since the new law went into effect, according to a draft study by Michael Simkovic, at Harvard Law School, released earlier this year.

He estimated credit card companies saved $8.6 billion in 2006 and $5.8 billion in 2007 just in their declines in loan losses -- money set aside to write off bad debt.

But credit card interest rates, late fees and over-limit fees rose while grace periods shrank, Simkovic found. The spread between what credit card companies charged and the cost of money in a falling interest rate environment widened, Simkovic found. For him that highlighted a stark conclusion of the law: "[C]redit card companies benefited at consumers' expense."

Mike Meyers • 612-673-1746