BANKRUPTCY
THE
CONSTITUTIONAL RIGHT TO “START OVER”
UPDATE: THE NEW BANKRUPTCY LAW OF 2005
Our
original article, written in 2002, should be read with the following update in
mind:
This article provides basic information on The
Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. This law
represents a major reform of the US bankruptcy system. Changes instituted by
this new law took effect on October 17, 2005. Below are some of the key
changes that came about as a result of this new bankruptcy law.
- Mandatory
Credit Counseling -
As of October 17,
2005, before filing for bankruptcy most applicants must now undergo credit
counseling in a government-approved program. You can get more information on the
procedure for pre-filing credit counseling (and a list of approved credit
counseling agencies) from the
U.S. Trustee Program at
www.usdoj.gov/ust
(a component of the Department of Justice responsible for overseeing the
administration of bankruptcy cases).
- Stricter
Eligibility for Chapter 7 Filing -
Under the new law,
bankruptcy applicants who wish to file under Chapter 7 must meet certain
eligibility requirements under a "means test." Under the "means test," if your
current monthly income is less than the median income in your state, you can
file for bankruptcy under Chapter 7. But if your current monthly income is above
the median income in your state, and you can afford to pay $100 per month toward
paying off your debt, you cannot file under Chapter 7 and must proceed under
Chapter 13 (more on Chapter 13 below). Whether you can afford to pay $100 per
month (or $6,000 over a five-year period) is based on a formula that includes
your monthly income, your expenses, and the total amount of your debt. You can
get more information on means testing from the
U.S. Trustee Program as indicated
above.
- Tax Returns and
Proof of Income Required -
Under the new
bankruptcy law, people wishing to file bankruptcy under Chapter 7 or Chapter 13
must show proof of their income by providing federal tax returns from the last
tax year. If a bankruptcy filer has not paid taxes for the previous tax year, he
or she must do so before the bankruptcy can proceed.
- More Filings
Under Chapter 13 -
As discussed above,
if a bankruptcy applicant is ineligible for filing under Chapter 7 based on the
"means test," he or she must file under Chapter 13 instead. There are a number
of major differences between Chapter 7 and Chapter 13 bankruptcy, but the main
distinction is that under Chapter 13, the debtor enters into a five-year
repayment plan in which he or she must pay a certain amount of money to
creditors, based on a strict expenses-to-income formula.
- Fewer
"Automatic Stay" Protections for Filers -
People who file for
bankruptcy have traditionally been entitled to certain immediate protections
from creditors and others -- including most debt collection and lawsuit actions.
These protections are part of what is called the "automatic stay" effect of a
bankruptcy filing, because many potential legal actions against the filer are
stopped. But, under the new bankruptcy law, some of these protections have been
eliminated. For example, filing for bankruptcy no longer delays or stops
eviction actions, driver's license suspensions, legal actions for child support,
or divorce proceedings.
- New Priority
for Unpaid Child Support and Alimony -
Bankruptcy laws
provide a system of re-payment priority for people and companies that are owed
money ("creditors"). Under the new bankruptcy law, among the changes in creditor
priority is that people who are owed unpaid child support and alimony (i.e. the
bankruptcy filer's family members) take priority over any other creditor.
- Mandatory
Financial Management Education -
After the conclusion
of bankruptcy proceedings, but before any debt can be discharged, bankruptcy
debtors must participate in a government-approved financial management education
program. You can get more information on the procedure for financial management
education (and a list of approved debtor education providers) from the
U.S. Trustee Program, previously
mentioned.
General
Observations:
The law imposes new
duties on debtors and their attorneys, and failure to timely perform those
duties will result in dismissal of the case or lifting of the automatic stay.
Coupled with the new limitations on a second filing, the consequences of
mistakes, inattention, or misfortune become far more serious, as the court and
the trustee have less discretion to deal with human error and intervening
circumstances. The presumption that the debtor is entitled to relief from his
debts is effectively replaced by presumptions that the debtor’s filing is
abusive until the debtor proves otherwise.
BASIC LAW BEFORE THE 2005
ACT:
Introduction:
Many people are
unaware that it is the Constitution of the United States of America that
provides to its citizens the constitutional right to file bankruptcy and begin
anew one’s economic life. This was not an “after thought” by our Founders. It
was a vital and central right, to their way of thinking a right as important and
as basic as the other constitutional rights to freedom of speech, assembly and
religion.
Debtor’s prisons were a common danger faced by English citizens
prior to the founding of the United States and, indeed, in many of the states,
themselves. Under that system, a creditor who was unpaid could have a debtor
arrested indefinitely, until the creditor was paid. It was not uncommon for a
debtor to spend longer in prison than a felon convicted of theft or assault.
The men who drafted the Constitution were adamant that one
should not lose one’s freedom because one was in debt, but even went further,
allowing a citizen, once every seven years or so, to file proceedings in the
Federal Courts to discharge most debts and begin again without the overwhelming
burden of debt. The Founders were convinced that the American nation could best
be served by allowing those citizens who had found themselves buried in debt to
pour their remaining assets into the Court, keep enough back for the necessities
of life, distribute the rest among the creditors prorata, and begin anew.
That process,
far more complicated after two hundred and fifty years of the workings of the
Bankruptcy Courts, remains the basic bankruptcy process even today and an option
available to any debtor who finds him or herself so undermined by debt that no
other solution seems workable.
For the
creditor it is equally vital to know and understand the basics of bankruptcy
since the decision as to whether to loan or sell to a person must be based, in
part, on whether bankruptcy may render the debt uncollectible. Further, certain
types of debts and obligations are NOT discharged by bankruptcy and the creditor
must know and understand how to utilize the creditor rights granted under the
bankruptcy laws.
The topic is a broad one requiring good legal and tax advice for
both the creditor and debtor, but this article shall seek to outline the basics
of bankruptcy so that the debtor or creditor will understand his or her basic
rights and remedies. Good professional advice is recommended before acting on
the advice in this article. This article is no substitute for obtaining such
advice,
The Types of
Bankruptcy
While
there are various types of bankruptcy available for public and semi public
entities, the ones that concern the average person are
Chapter 7
Bankruptcy in which
the individual or business liquidates its assets under the auspices of the
Trustee appointed by the court, keeps certain “exempt” assets, and is discharged
from all debts but those predicated on taxes, child support and/or intentional
wrong doing (discussed in more detail below.);
Chapter 13 Wage
Earner Plan in which
the regularly employed individual, instead of surrendering his or her assets to
the Trustee, develops a plan for paying off all or a portion of his or her debts
over time under the supervision of the Court (subject to objections by
Creditors); and
Chapter 11
Reorganization
in which a
business creates a plan to pay off all or part of its debt subject to court
supervision and creditor review.
The purpose of the Chapter 7 proceeding is not to pay off
creditors but to simply deliver what nonexempt assets one has to the Trustee,
get the debts discharged, and start anew. The purpose of the Chapter 13 and
11 proceedings is to halt creditor action long enough to develop a plan to
pay them off in whole or part, with the supervision of the Court and creditor’s
committee. Due to their complexity, both Chapter 11 and Chapter 13 proceedings
are normally far more expensive to file and conclude and Chapter 11 business
reorganizations can easily cost fifty thousand dollars for attorneys and
accountants and many cost well over one hundred and fifty thousand dollars for
a typical medium to large business. Indeed, when major companies such as P G & E
file bankruptcy the cost for attorneys can run in the millions of dollars.
Chapter 7 proceedings, on the other hand, are relatively cheap
and there are law offices which handle hundreds of them a month for less than a
thousand dollars each. That method works for many of the simpler bankrupt
clients, but is not the best choice if there are any complexities to the filing
or if the client wishes any personal contact with the attorney, for the
bankruptcy “factories” cannot allocate personnel to do more than fill in the
form and perhaps meet the client a few minutes before the hearing in bankruptcy
court. There are also excellent books available which enable people to draft
and file their own simple Chapter 7 proceedings and such bookstores as Stacey’s
stocks those types of books.
Chapter 11 and Chapter 13s, however, almost always require
competent legal advice, as does any business bankruptcy or any bankruptcy which
has business, trust, family, divorce, or international complications.
Basic
Procedure in Bankruptcy…What Happens When You File
Once the
Petition for Bankruptcy (or Reorganization) is filed with the Court the
creditors receive an immediate order from the Court (a “stay”) ordering
them to refrain from taking any further action to collect the debt. This order
supersedes all jurisdiction of any State court and stops all writs of execution,
garnishments, foreclosures, etc, immediately. Any creditor ignoring the order
faces severe penalties from the Federal Court. Even efforts to evict a tenant
are halted by the stay. Further, the debtor’s assets are “frozen” at that
moment, and except for exempt assets (discussed below), the Trustee now has
control of all assets of the bankrupt and holds them for eventual distribution
to the creditors.
For creditors who feel they have rights not stopped
by bankruptcy, they still must go to Federal Court to obtain any and all
relief. Assuming that a creditor has rights that are not stopped by bankruptcy
(such as the right to foreclose on a Deed of Trust or reclaim occupancy of
rented space or foreclose on a mechanics’ lien) that creditor must petition the
Bankruptcy court for relief from the stay and only then, should the Bankruptcy
court grant it, may the creditor proceed. Thus, filing the Petition
automatically delays all actions to collect and for the average unsecured
creditor, stops collection actions permanently.
One begins bankruptcy by filing
a Petition with the Court and the type of petition filed depends on the
type of bankruptcy one is planning. It is important to note that either
voluntarily (or involuntarily if the Court so determines) a Chapter 13 or 11
which is not progressing according to plan or in which the plan is considered
inappropriate may be converted to a Chapter 7 liquidation bankruptcy after being
filed. Indeed, most Chapter 11s do end up ultimately failing and being converted
into Chapter 7 bankruptcies.
(This article shall only discuss
voluntary petitions in bankruptcy and shall not discuss involuntary bankruptcy
in which creditors seek to force a person or entity into bankruptcy, a topic of
some magnitude requiring its own article.)
Once the Petition is filed, the
stay is immediately sent out by the Court to all creditors listed and, in the
case of Chapter 7, a hearing is set by the court at which the Trustee
appointed by the court and any creditors wishing my examine the debtor to make
sure that all assets and liabilities are properly listed. The duty of the
Trustee is to represent the creditors in making sure all debts are listed, all
assets that are not exempt surrendered to the Court’s jurisdiction, and to
collect as much of the nonexempt assets as possible for the benefit of the
creditors. The Trustee is paid based on the assets in the Bankrupt estate so
obviously wishes to maximize what can be obtained from the bankrupt for the
benefit of the creditors. The average Trustee is a professional attorney who
specializes in such work and has hundreds of bankruptcy files to deal with each
month. They cannot spend a great deal of time with any file unless the assets or
facts are remarkable in size or complexity.
For Chapter 13 and Chapter 11 bankruptcies, the
procedure is much more complicated with the debtor submitting a plan to the
Court for consideration by the creditors and the Court. The process is too
complex to explain here, but suffice to state that the plan must be approved by
the Court and at a minimum must pay to the creditors what they otherwise would
have received had a Chapter 7 rather a Chapter 11 or 13 have been filed.
The Chapter 7 hearing is usually quite short and
uneventful, with the Trustee asking a few basic questions and with the actual
creditors being quite limited on what they are allowed to ask. The key issues
are whether all assets have been properly listed and whether any assets were
improperly transferred prior to bankruptcy…for if they were, the bankruptcy
court has the right to insist that the transferee return the assets to the Court
for dispersal pro rata to the various creditors. To simplify, a transfer is
considered “preferential” thus subject to being returned to court, if it was
made within ninety days of filing bankruptcy or, in the event of a transfer to
an “insider”, within one year of filing bankruptcy. There are many exceptions to
the preferential transfer rule, and good legal advice and advanced planning is
vital long before one files bankruptcy…but suffice to state that if one
transfers valuable assets to friends or relatives in a hope to avoid having to
surrender them to the bankruptcy trustee, one will usually fail in that effort.
If the debtor contests a claim
from a creditor, a trial (“adversarial hearing”) may be held in the bankruptcy
court usually within a year of the initial filing. Assuming the Chapter 7 goes
the way of most, no such hearing will be required and after several months the
court will discharge the debts and the bankrupt individual is finished with the
entire process.
For Chapter 13 and 11s, however,
the court and creditors committee continue monitoring the success of the plan
(typically, to pay only a portion of the debts over a three or five year period)
and the discharge occurs when the plan is successful…or, if unsuccessful, when
the court dismisses the entire process or converts it to a Chapter 7 liquidation
bankruptcy.
Ultimately the Court sends a
discharge order to the various creditors and to the debtor and the
matter is concluded. In a Chapter 7 proceeding, it is usually only necessary to
go to court once. In a Chapter 11 or 13 proceeding, more appearances are usually
necessary. If the plan adopted in the Chapter 11 or 13 fails, it can be
dismissed (allowing creditors to again begin legal action) or converted to a
Chapter 7 liquidation. If the Plan is successful and all the payments made, then
the proceeding is closed once that is demonstrated to the Court’s satisfaction.
In a Chapter 7, the final order of the Court is a discharge of all debts and the
matter is concluded.
LIMITATIONS ON
THE BENEFITS OF BANKRUPTCY: NONDISCHARGEABLE DEBTS
The purpose of bankruptcy is to eliminate the burden
of debt or, at the least to get time to put your business life back together
long enough to pay off your debts. This works for most unsecured debts, but the
exceptions are many and most be noted.
Debts based on certain types of wrongful acts
are not necessarily eliminated by bankruptcy. Debts based on judgments or
claims predicated on intentional wrong doing (assault; battery; fraud (if
Chapter 7 or 11); conversion, etc.) are normally not dischargeable.
Debts owed the government such as taxes
and liens are usually not dischargeable. Debts based on fines or penalties
levied by the governmental authorities or court are usually not dischargeable.
(Indeed, tax refunds due you are usually listed as part of your assets and
transferred to the Trustee in bankruptcy.) Student loans are no longer
dischargeable in most cases.
Credit cards are usually dischargeable (so
far though there is pressure to change the law) but there are exceptions. If
luxury goods were purchased forty five days before bankruptcy or cash advances
made, there is a presumption that they are not dischargeable. There are other
exceptions but careful analysis of the source of the debt must be carefully
considered before the decision to file bankruptcy is made.
Court imposed obligations such as child support
and, often, alimony are usually not dischargeable, and orders involving
clean up of toxic wastes and restitution for such damages may not be
dischargeable.
And secured obligations normally require the
surrender of the security to the creditor. Thus Deeds of Trusts, Mortgages,
Mechanics Liens, secured commercial transactions, conditional sales contracts
and the like often allow the asset to be foreclosed upon by the creditor once
they obtain leave of the bankruptcy court.
And note that if one has personally guaranteed a
debt, the filing of the bankruptcy petition by one’s limited liability entity
will not stop the creditor from seeking to enforce the guaranty…one may be
forced into bankruptcy because one’s corporation or limited liability company
files bankruptcy and now the creditors seek to enforce such guarantees.
WHAT DO YOU NORMALLY GET
TO KEEP?
Each State has its own level of exemption from
execution on the family home and the Federal Bankruptcy law normally gives one
the choice of taking a flat exemption of approximately fifteen thousand eight
hundred dollars or maintaining up to a certain amount of equity in the family
home. The amount of equity allowed depends on whether one is head of a family,
married or single. A rough estimate in California is that one can
normally keep about one hundred and twenty five thousand dollars in equity
or the flat amount.
Tools of the trade, household furniture and clothing
is also normally not seized by the Trustee in bankruptcy unless there are items
of remarkable value, such as antiques or very valuable jewelry. (Remember that
one must list all assets and liabilities under oath in the Petition for
Bankruptcy and failure to list all of those correctly can lead to dismissal of
the Petition with prejudice ( meaning one cannot file again for seven years) or
even criminal sanctions if perjury is proven.)
Thus, if one’s home has appreciated in value so that
one has several hundred thousand dollars in equity when one files bankruptcy,
the odds are the Trustee will seize it for sale. It would be better to borrow on
the home so that the amount left is below the limit of exemption and use the
proceeds to pay off secured obligations such as a vehicle, etc…so long as the
vehicle is not too valuable, for it can also be seized by the Trustee if worth
too much.
It is also important to note that community
property assets are subject to the jurisdiction of the bankruptcy court even
if the spouse is not filing bankruptcy. Thus even if legally the bankrupt only
owns half of the home, if it is community property, the spouse not filing
bankruptcy may very well see the home seized and sold assuming the equity is
above the exempt amount. Community property, in California, is usually subject
to claims of creditors even if the spouse did not sign onto the creditor’s
obligation directly. Put simply, one’s separate property and the couple’s entire
community property must be included in the bankruptcy estate.
As for retirement savings, one normally may
keep whatever is in one’s 401K but for IRAs, one only keeps an amount equal to ,
“what is reasonable support of the debtor and the family upon retirement.”
Thus, for an IRA, if one is in one’s forties one will be able to keep far more
than if one is in one’s twenties. (Note the inherent advantage of using a 401K
rather than an IRA for retirement purposes.) Realistically, for most people they
need not worry if their IRA is at the level of one hundred thousand dollars or
less…they will probably be able to keep it even after filing bankruptcy.
One also will lose one’s credit standing and,
depending on the nature of the credit one seeks, one can expect one’s credit to
be affected for at least five years and perhaps as long as ten years. This is
less of an issue than it may first appear since most people do not even consider
bankruptcy until their credit is already eroded to the point that they have
little left to lose. Bankruptcy, if decided upon, merely extends the length of
time that credit is likely to be effected. Further, one can often immediately
begin to rebuild credit with certain credit card companies and loan companies
via various programs they have…albeit usually at extra interest cost.
But the main advantage, the main thing one “keeps”
is freedom from the demands of creditors and legal actions they bring. One can
eliminate for the most part the daily hassle of constant demands for payment and
the need to respond to collection actions brought or writs of attachment served
on your business or employer.
One will lose most of what one has left…but one is
able to begin the process of rebuilding assets and credit with what amounts to a
clean slate.
TRANSFERS VOIDED BY THE
BANKRUPTCY COURT
It is not uncommon for potential bankrupts to seek
to protect assets that would otherwise be seized by the Trustee by transferring
them to friends or family, thinking to eventually retrieve them or, at least, to
have the asset enjoyed by a friend or business colleague to whom one “owes”
gratitude, etc. This seldom works. The law is simple: any transfer to an
“insider” within one year of bankruptcy filing may be voided and reclaimed by
the Trustee. An “insider” is normally defined as a family, friend, or business
associate. Further, any transfer to anyone within ninety days of bankruptcy is
normally voided unless for ongoing new obligations associated with daily
business or personal needs. (Thus paying rent on your apartment or commercial
building would not be voided…that is a new debt paid as accrued. But paying your
landlord for long past due rent for the last six months and then filing
bankruptcy ten days later will probably have the Trustee insisting that the
landlord return the extra rent for sharing, prorata, with the other creditors.)
Assuming the party receiving the transfer refuses to
return it, the Trustee can (and often does) commence a proceeding in bankruptcy
court to retrieve the extra payment.
Practicality again pertains. Trustees are busy and
very small transfers will probably not be a matter of deep concern unless a
creditor pushes them. But a transfer approaching one hundred thousand dollars
will almost always be spotted and pulled back by the Trustee and if one’s
creditors are aggressive, this writer has seen payments as small at two thousand
dollars retrieved by aggressive Trustees.
Note that these transfers give rise to
“presumptions.” They are not automatically void, just presumed void until the
bankrupt can demonstrate that the transfers were somehow related to appropriate
payments, e.g. for present needed services in the day to day business, etc.
Wholesale transfers of one’s assets, however, will seldom work and can result in
severe penalties and must be avoided.
PLANNING FOR FILING OF
BANKRUPTCY; THE EFFECT OF BANKRUPTCY
It is vitally important to obtain good advice before
one files bankruptcy and long before if at all possible. Careful planning can
prepare one’s assets to maximize what is exempt and avoid some very upsetting
surprises. For instance, if one files bankruptcy without using one’s equity line
to bring the debt below the exemption, or without taking into account accrued
tax refunds or security deposits with one’s landlord, one can very well lose
important advantages. It is important to consider the effect on assets that one
normally never thinks about as “assets”…trade names; damages for personal
injury; intellectual property or copyrights…all these things are ripe for
seizure by the Trustee unless structured in the correct way.
Further, it is possible to lose an asset to the
Trustee but then buy it back from the Trustee in later negotiations. While one
will have to bid against any third parties or creditors, the fact is that
normally no one else can make good use of certain assets, such as a trade name
or intellectual property, and the plan to somehow retrieve such assets can form
part of the advance planning for a business bankruptcy.
Ideally, one obtains good legal advice six months
before bankruptcy is needed…the more time to plan the better. It makes sense to
plan ahead so that even if one ultimately does not need to file for protection,
one is informed and the structures in place for that perhaps necessary
eventuality. The worst thing one can do is wait until one has no choice and must
rush to file without advance planning or structuring of assets and debts. That
occasionally occurs, but if you can anticipate that necessity by even a few
months, there are definite advantages available by careful planning.
How do you know if bankruptcy is necessary? A good
if not infallible rule of thumb is that if your debts cannot be substantially
eliminated or entirely paid off at your current rate in five years (not
counting mortgages and such debts) and if you are not likely to have a raise or
other influx of money, then you are likely to remain in debt forever. Simple
computation of interest charges should demonstrate to you if you can make
progress in paying down your debts. Many debtors find to their horror once they
perform their computation that even if they make all payments on a timely basis,
the reduction in their debt is almost nil on an annual basis…that it is likely
that eventually they will either ultimately fail to make payments (if illness or
job loss occurs) or will be in debt for the rest of their lives.
If such is your case, and if you cannot alter your
spending habits to generate a surplus to pay down the debts, then you must
seriously consider bankruptcy. It is a serious decision requiring good advice
and not to be taken in haste.
But it is also a Constitutional Right, one of the
sacred rights considered so important by our founding fathers as to be included
in the same documents as the right to vote, to have free speech or freedom of
religion. It is not a disgrace to be insolvent and to require the use of rights
placed in our Constitution by the people who founded our nation. It is a fact of
economic life that from time to time one may fail in one’s efforts to meet one’s
financial commitments or obligations…and should that time arise, the powerful
tool of bankruptcy is a device that should be considered without hesitation…but
with care.
Equally vital is the need to
consider the effect on family and spouses. Put simply, all community property is
normally subject to creditor’s remedies even if the debt was only incurred by
one spouse. Thus the filing by a spouse often requires the filing by both
spouses, unless there is a prenuptial agreement or some other method which
defeated community property. The key is advance
planning and analysis of both assets and liabilities of the debtor BEFORE any
decision to file is made.
It is common to
hear potential bankrupts state that they cannot file for bankruptcy since their
“credit will be ruined.” In most cases, however, the credit is already ruined
before the issue of bankruptcy even becomes discussed. One must be realistic. If
one is failing to pay bills and has been doing so for months or years, one’s
credit cannot be much more damaged.
It is true that a bankruptcy will stay on one’s credit history
for perhaps ten years and its existence will make credit much more expensive to
obtain. It is true that one must start from scratch, often slowly and only
obtaining small credit at first, and slowly building it up. It is true that it
is often a psychological blow to have to “admit failure” and this writer is
often surprised at the emotional reaction of otherwise calm and intelligent
business people when faced with the necessity to use their constitutional right
to file bankruptcy. In our society it is often seen as a stigma, a sign of
“defeat.” One must have the mental discipline to overcome such labels if one
wishes to begin again one’s economic recovery.
And if you are a creditor, you must recognize that
the specter of bankruptcy haunts every business transaction and you must
carefully evaluate the likelihood of such a procedure before granting credit and
must learn and understand the rules for voiding transfers and of exempt assets
to ensure that a person filing bankruptcy does not somehow escape the strict
rules of surrendering assets that are normally imposed. Creditors should not
just “give up” their claims once receiving the stay from the Bankruptcy Court.
The rules and procedures change, but the creditor must learn them and continue
to seek to maximize the chances for maximum collection within the bankruptcy
arena. To ignore the debt because one receives notice from the Court may lose
one the opportunity to at least retrieve a portion of the debt.
CONCLUSION
One of our clients who died a multi millionaire had
filed bankruptcy twice in his long career. He once commented to this writer that
he often thought with amazement of the “fools’ who remained in debt rather than
used bankruptcy to begin economic life again without undue burden. “Anyone can
get into a hole. It is a typical danger of taking economic risks. Only the fools
stay in the hole hoping to dig their way out. If the government gives me a
right to start over, I think I owe it to myself…and to my family for that
matter…to take that chance and try again.”
He said that, but this writer also remembers the
anxiety and near agony he felt when he faced the “disgrace” of filing the
Petition. He struggled long and hard to avoid that both times and only became
philosophical about the need once he rebuilt his fortune.
And perhaps that is the best way to consider
bankruptcy…it is not a way to escape debt so much as a way to begin again the
effort to build one’s fortune. One pays a large price in term of lost credit,
emotional turmoil and perhaps a feeling of failure…but the alternative of trying
to do the impossible of paying off huge debt for the rest of one’s life is to
guaranty a life of toil with little benefit. Once one’s fortune is again made,
one can always elect to pay off the prior debts…which is what our client did
before he died, enjoying the surprise on the face of creditors who had written
off those debts almost a decade before! He once told this writer that what kept
him “sane” during the depressing period of filing his bankruptcies was his
conviction that someday, down the road, he would pay off these debts
voluntarily, proving that it could be done if he was just given the chance to
start again. |
