I come across them everyday — misconceptions about bankruptcy and what it is about, what it requires and whether or not someone can file for bankruptcy protection. My experience is that there is a huge number of misconceptions, half-truths and downright lies about bankruptcy. Today I’m writing about one of the biggest lies about bankruptcy: that people are seeking bankruptcy relief who don’t really need it.
That’s Absolutely Not True.
In 2005 Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act also known as BAPCPA, to wide publicity (and applause by the credit card industry who bought and paid for the legislation, I might add.) The stated intent of BAPCPA was allegedly to “crack down” on people who were abusing the system by frivolously filing bankruptcy under Chapter 7 and discharging their debts, but who allegedly could afford to pay them instead.
In order to stop these mythical deadbeats, Congress set up a means testing provision in bankruptcy so that families who made more than the median income for the same size household would be ineligible for Chapter 7 and would presumably be forced into a Chapter 13 bankruptcy where they would have to pay back their debts.
The Truth: over 90% of the people who were filing Chapter 7 bankruptcy (also known as a liquidation bankruptcy, where no debts are discharged without being repaid) before BAPCPA, are still eligible to file a Chapter 7 today.
As it turned out the alleged problem that Congress was attempting to solve (people rushing into bankruptcy who could otherwise afford to pay) was simply not true. One of my heroes, Oklahoma Native Son Will Rogers once said that “It ain’t what people don’t know, it’s what people know that just ain’t so.” Who’da thunk it? Congress was simply wrong. (I know, it’s shocking but true!)
The truth is that people DO NOT want to file bankruptcy — in fact, my experience has been that they will often put off filing long after they should have done so.
Denial is a powerful and real psychological phenomenon. For those finally do work up the courage to confront their financial problems and speak to a bankruptcy attorney for advice, they usually find that the fears which held them back — fear of public humiliation, or that they won’t ever be able to get credit, or that they will be somehow ineligible for bankruptcy relief — are completely unfounded. What they find is at long last relief and a fresh start.
Hopelessly Hoping
In most cases, I find that my potential clients have spent on average 4 to 5 years treading financial water, trying desperately to keep their financial noses above the waves, hoping against hope that their situation will somehow magically right itself and things will be fine. They spend years of their lives in utter desperation and chaos, trying to juggle their financial obligations — paying Mastercard this month, Visa the next, and Discover Card the month after — only to be 5 years older and deeper in debt, with a trashed FICO score before completely exhausted and they finally give up. In fact, until they finally get sued and their wages garnished – until the pain gets so intense that they cannot stand it anymore – they won’t even think of filing bankruptcy. The sad truth is that if they had instead somehow found the courage to face reality 5 years before, they would have long since recovered their good credit and not wasted years of their lives in misery.
That’s how much people want to avoid bankruptcy — they’re willing to spend years in abject misery and desperation before they’ll consider it.
In my experience, most people are needlessly ashamed of their financial situation. Bankruptcy is enshrined in our Constitution (Article I, Section 8, Clause 4) and even the Old Testament provided for a system of debt relief every 7 years and a Super Jubilee every 50th year (see Leviticus 25). Some of the highest principles of Judeo-Christian culture are the linked ideas of mercy and the possibility of freedom from slavery.
And yet, people often think they are doing something wrong or shameful when they find themselves unable to meet their obligations. Let’s be clear: if you can pay your debts, you should. But the number of people who’ve consulted with me about debt relief who could pay off their debts but simply chose not to, is so small that I could count them on the fingers of my left hand. Your natural sense of justice and natural law itself causes you to want to pay your debts. It feels good to pay your debts, and if you’re like most everyone else you want nothing more than the ability to pay them.
If you haven’t lied to anyone or cheated anyone, or intentionally incurred debts you had no intention of paying, then your actions — however unwise — were not dishonest or morally objectionable. As I often remind my clients: you haven’t done anything wrong, and despite some perhaps boneheaded mistakes with your money, you’re now trying to do what’s wise and necessary to right your financial ship. And that’s all anyone can ask of you. In fact it’s the right thing to do. You can’t change the past, but you can change your future.
Whether the solution is bankruptcy or some other way out, you need relief. You need a fresh start — a “do-over” as we used to call it when we were children.
Have you made the wrong financial moves? Have you, like my friend Dave Ramsey, done “stupid with zeros on the end of it”? Have you now found yourself where you think there’s just no way out? Are you desperate? Has your financial crisis caused marital or family strife (financial problems are the number one cause of marriage failure)?
Well I’ve got good news for you: there is a way out. In fact there are often multiple ways out — one of which might involve bankruptcy, but others that might not. The important thing is that you reach out for help and consult a professional. Let me throw you a lifeline to safety and sanity. You’re not a deadbeat — you’re just desperate.
Call me, I can help.
Ben Callicoat
918 409-2462
tulsabankruptcylaw@gmail.com
