1.0 In General
For those interested in the topic
of bankruptcy reform the following material may be of interest to you. Section two discusses the typical causes of
filing. Section three is an article on
bankruptcy reform by Mary Rouleau.
2.0 What are the Typical
Causes of Bankruptcy Filing
2.1 In General
Many people ask why the news
reports that bankruptcy filings are so high, especially in Utah. Before answering this question more fully, it
is important to beware of statistics.
They may not be truly accurate of what you think they represent. Upon inquiry the author learned that the
statistics upon which the Utah
ranking is based is determined by “total bankruptcy filings” rather than the
actual number of different individuals filing.
Of the two basic types of consumer bankruptcy (7 and 13) more Utahns file 13's (repayment plans) than the national
average. Traditionally Utah
has also had some of the most restrictive laws on the approval of chapter 13
payment plans. Thus a large percentage of
cases are not confirmed (through technical failure) or are not really feasible
(based upon budget limitations). Thus,
many individuals who wish to repay their debt or save their homes file multiple
times to try and get it right, before they file a chapter 7 as a final
alternative. Further, there appears to
have been a recent drop (about 46%) in Utah
bankruptcy filings. Thus, news reports
can be inaccurate and misleading.
2.2 Credit Card Debt
Credit Card debt is the number
one cause of bankruptcy filings.
Congress and the Courts have known for years that Bankruptcy Filings are
directly related to the amount of National Consumer Debt. You can directly calculate the number of
cases that will be filed if you know the National Numbers. The recent policy of credit card companies
issuing cards to people who do not qualify for credit has dramatically affected
the number of filings. And all attempts
by congress to stop this practice have failed.
Credit card companies contribute to political campaigns, and they are
currently making record profits regardless of the number of bankruptcy filings.
You must also factor in that in a
declining economy, larger number of individuals are using credit cards to make
up the difference in rising living expenses that wage increases have not
matched. We are staving off a major
depression through the use of consumer credit.
2.3 Medical Costs, Job Losses, and Divorce
The majority of people filing
bankruptcy do so because of Medical Expenses, Job Loss, and/or Divorce. These people do not want to get out of
paying their debts. Due to a an event
often beyond their control they are no longer able pay their bills.
Statistics tell us that most
individuals are two paychecks away from Bankruptcy. Thus no income for a 30 day period often
results in bankruptcy. A 3 month cushion
of cash would prevent 70% of all bankruptcies filed. The LDS
Church recommends 6 months to a
year cash reserve.
It should also be noted that
medical insurance does not help. Because
of the astronomical current cost of medical services, the co-pays alone (often
totaling 20,000 to 200,000 dollars for major surgery) are enough to cause
This problem is particularly
apparent among seniors who are the fastest growing group of bankruptcy
filers. 85% of seniors file due to
medical or job problems.
This is compounded by the fact
that most seniors now retire with mortgage debt. 30 years ago their houses were paid for at
retirement and they had a company pension in addition to social security. Most retirement plans have failed in the last
15 years and are currently unfunded.
401K’s are a joke and at a retirement most individuals have only 11% or
less of their actual contributions. (The
rest going to prop up the stock market or into the hands of “profit takers”.) Social security is not sufficient to even
make the monthly mortgage payment, nor does medicaid
cover their medical debt.
Another problem for Seniors is co
signed debt. 80% of cosigners do not
pay. Thus mom and dad get stuck with the
repossessed car debts.
2.4 The Utah
has some unique economic problems.
First, our tax base is very small.
Most of the land is Utah
is owned by the federal government and cannot be used or developed without
government approval. Hence all of the
miners currently out of work in Southern Utah. Since this land cannot be developed, Utah
lacks heavy industry and the economy is mostly service based. This generally does not promote wealth, high
wages, and large tax revenues.
Second, traditionally Utah
families have been larger than the national average. This means it costs more to maintain a family
(even under the best of conditions) than elsewhere. If the local economy were more agrarian this
might not be a problem, but in an urban environment it is. This same phenomenon increases the per capita
cost of education in Utah (in
other words higher taxes).
Third, we have more institutions
of higher learning, and more students per capita than other states. This creates a worker pool that lowers wages
without increasing productivity.
Fourth, in the mid 80's Utah
had a large influx of individuals moving here from California. This artificially inflated the real estate
market. As a result, homes were
appraised at higher than actual value and many loans given far above
value. We are now experiencing the
result as Homes cannot be sold for the amount of debt and most sales are short
sales (sales that do not pay off all the mortgage debt). A bankruptcy then becomes the only way out.
2.5 The Second Mortgage Problem
People have been bombarded in the
media (and as a result of tax legislation), that the best way to get out of
debt has been to acquire a second mortgage to pay off the credit cards. There are a number of problems with
this. First, unless there is fundamental
economic change, the person will simply continue to use the credit cards and escalate
Second, second mortgages directly
impact a families base financial survival.
Because a second mortgage raises basic living expenses, most families
find they can no longer pay their regular bills. In the author’s experience most individuals
lose their homes within 6 months to 2 years after obtaining a second mortgage. Getting a second mortgage has not gotten you
out of debt, it has simply secured it with a home. Now if you can’t pay you lose the home. Otherwise a bankruptcy would have wiped out
the unsecured debt and you could have kept the home. 80% of current filers lose theirs homes as
opposed to 20% ten years ago.
Third, there is a great deal of
fraud related to second mortgage debt in addition to fraudulent appraisals as
to value and false statements as to income.
Many individuals are promised one rate and payment, but are then given a
higher rate and payment at closing.
Because of the pressure to go forward they sign agreements they cannot
keep. Often the interest rates on second
mortgages are actually higher than credit card rates, but the payment seems
lower because it is stretched over 30 years.
You are usually better off to refinance the first. Excessive fees are also often added to second
Fourth, only a portion of the
interest is deductible. If you pay
$9,600 in interest a year [which is typical today]. Most can deduct only $1,632 of it against
taxes. You’ve paid over $9000 in
mortgage payments for a $1600 deduction.
Fifth, Church leaders have long
counseled members of their congregations to pay off their homes and not to subject
them to debt. Placing debt against a
home endangers a families security and ones ability to survive at retirement.
2.6 Post Date Check and Title Loans
Related to a declining economy is
high interest post dated check and title loans.
These loans are often at 500 to 740% interest. Over a period of one year a $1,000 loan will
require repayment of $8400. The amount
due doubles every 2.8 months. Plus there
are finance changes in addition to the interest. Many bankruptcy clients have these types of
2.7 Cultural Factors
Next there are a number of
Cultural Factors that contribute to bankruptcy filing. First, in the past debt was considered
abhorrent, now only failure to repay is considered a character fault.
Second, due to a number of
factors including the media; people expect to live “the American life style”
People are no longer willing wait for nice things. They want them now. Of course, they cannot pay cash for such
things so they must obtain them on credit.
This is contrary to LDS Church
teaching that debt is only approved for a “modest home”, an education leading
to employment, and“reasonable transportation”.
Third, is an LDS Cultural
Phenomenon that the “appearance” of wealth is equated with spirituality or a
religious life. This seems to effect
about 70 to 80% of church membership (usually those who are social rather than
believing [testimony holding] members).
Related to this, at least in Utah,
is the concept of social acceptance. If
you do not participate in approved activities or have the right possessions,
you do not fit in. Thus, there is great
pressure to get into debt to fit in.
Finally, there are the growing
numbers of married working mothers. This
floods an already saturated job market reducing wages. In addition, statistics show that married
working mothers often contribute less than 10% of their gross wages to
household debt. This is because of
increased costs for food, clothing, transportation, and day care.43 Further the increased stresses upon
such women results in an 80% divorce rate within 5 years of going to work. This contributes to the factors already
3.0 The Truth About Bankruptcy
The following is a statement
prepared by the national Association of Consumer Bankruptcy Attorneys
The several-years debate over
reform of the Bankruptcy system has been long on credit industry rhetoric and
short on attention to the facts. The credit industry would have you believe
that there is widespread, deliberate abuse of the system. There is not. Yet the
Bankruptcy Conference report in the 107th Congress [HR333] would
have adversely affected honest and hard working American families facing
financial crises. The credit lobby is promoting passage of HR 333 in the 108th
Congress– with the backing of influential Members of Congress.
1. Let’s start at the beginning:
Who asked for “reform” of consumer bankruptcy laws? Bankruptcy Judges? No. The
on-going battle over consumer bankruptcy “reform” legislation really began in
1995 when creditors urged president Clinton and Congress to establish the
National Bankruptcy Review Commission (NBRC). The NBRC was charged by Congress
to undertake a review of the Bankruptcy Laws. For well over a year, the NBRC
conducted public meetings throughout the country, gathering testimony from
witnesses that rarely included users of the system. The credit industry was
well represented at those meetings. It pitched a highly restrictive “means test”
for consumer bankruptcy–as it had without success to Congress for well over 50
Years–as well as a host of other restrictions on consumers using the system.
The NBRC had nine members representing a variety of political perspectives, but
none of these members primarily represented consumer interests. In 1997, the
NBRC began to issue drafts of it’s report. It was apparent from these drafts
that the NBRC did not believe that the credit industry had met the burden of
proof in demanding a radical restructuring of Chapter 7 [the so-called “fresh
start” form of bankruptcy] by forcing people into Chapter 13 [which requires at
least partial repayment of certain debts]. The industry sent a letter to
Congress denouncing the direction the NBRC was taking and escalated its
multimillion dollar public relations and lobbying campaign to discredit the
NBRC. Turning to Congress for relief, the industry found sponsors for a bill to
their liking [HR2500], which was introduced in September 1997, about a month
before the NBRC issued its final report.
2. Okay, so this is a credit
industry effort, but can’t a substantial number of people who file bankruptcy
actually repay their debts? No. In a study commissioned by the nonpartisan
American Bankruptcy Institute, two researchers from Creighton
conducted a case-by-case analysis to determine whether debtors currently in
Chapter 7 could plausibly repay some portion of their debts. They concluded
that up to 3.6% of chapter 7 debtors would be candidates for any repayment in
chapter 13-a finding that was subject to learning about the debtors’ expenses.
Further, “studies” conducted by the credit industry ostensibly demonstrating
that a substantial number of bankruptcy filers could afford to pay back many of
their debts were criticized by both the Congressional Budget Office (CBO) and
the U.S. General Accounting Office (GAO). There simply is no credible evidence
that a significant number of debtors would be able to pay their bills if they
were prevented from filing for Chapter 7. This is especially true since the
nation’s economy has weakened in the last two years as unemployment and
underemployment has increased.
3. Who files for bankruptcy?
Academic research demonstrates that individuals filing for bankruptcy on
average earn under $20,000 a year after taxes. This research shows that, as a
group, the debtors who filed for bankruptcy in the 1990's were worse off than
their counterparts who filed inthe1980's. their incomes were lower and their
debt loads are higher. The top three reasons for filing bankruptcy are clear
and have not changed: (1) layoff, furloughs, cutbacks or other job problems,
(2) a medical crisis [this is the leading cause for those over 50]; and (3)
divorce, particularly for women. These three problems alone jobs, medical, and
family break-ups account for more than 90% of all filings. It is true that
consumer bankruptcy filings are at an all time high. This reflects the
prolonged economic downturn; business bankruptcies are also high. But even in
tough times, most households pay their debts and do what they can to avoid
bankruptcy–even though, from an economic standpoint, it would make better sense
for many of these families to seek a fresh financial start. In fact, one
academic study concluded that a much higher number of households would benefit
financially from filing bankruptcy than actually file: about 15% compared to
the about 1% that file on average. Attorneys who represent consumer debtors
report that the stigma associated with bankruptcy remains very real. Clients
are anxious to repay their debts and to keep their financial difficulties
quiet. Most people find their attorney as the result of advertising because
they are too embarrassed to ask family or friends for recommendations.
4. Opponents of HR 333 say that
the credit industry-in particular the credit card lenders–is responsible for
most of its losses because of reckless extensions of high levels of credit.
What is the relationship between bankruptcy and consumer debt? While about 90%
of bankruptcy filings are ultimately triggered by one or more of the three
factors listed above, debtor who file often have higher levels of consumer
debt, particularly credit card debt. Studies by the Congressional Budget
Office, the Federal Deposit Insurance Corporation, and independent economists
link the rise in consumer bankruptcies directly to the rise in consumer debt.
Deregulation of consumer credit interest rates has no produced a significant
decrease in credit card interest rates. Instead, deregulation has prompted
aggressive marketing and a loosening of underwriting standards that have
contributed to a rise in consumer bankruptcies. About of 60% of card holders
carry credit card debt from month to month. The average credit card debt for
households that carry a balance is more than $10,000. Since 1997, credit card
issuers have nearly doubled the amount of credit they offer to consumers, to
more than $3 trillion dollars– about $30,000 per household. Revolving debt,
which is entirely card debt, increased from $554 billion to $730 Billion
between 1997 and 2002. During the same period, credit card companies sharply
increased the number of solicitations they mailed from 3 to 5 billion per year.
Credit use over all has grown fastest in recent years among debtors with the
lowest incomes. In the early and mid 1990's, Americans with incomes below the
poverty level nearly doubled their credit card usage, and those in the
$10,000-25,0000 income bracket came in close second in the rise in credit card
debt. By 2000, about 1/3 of lower income families spent more than 40% of their
income on debt repayment, compared to 20% of moderate income households and 14%
of middle income families. Riskier borrowers typically carry a higher debt
burden, pay more interest, and suffer more defaults. With so many more at risk
families further in debt, it is hardly surprising that these families are
vulnerable to the financial emergencies that lead to default and bankruptcy.
5. Why do lenders continue to
extend credit to high risk borrowers, knowing that they may never be able to
repay it? Isn't this costing the industry a lot of money? No. The truth is that high risk lending is high
profit lending. These profits have
encouraged many institutions to substantially lower their consumer credit
standards. Credit card profits continue to be significantly higher than for
other bank lending activities. Bankcard
profits increased in 2001 to their second highest level in the last five years
(3.24% of outstanding balances.) Growing profits were largely driven by the
increasing "interest rate gap" between the benchmark rate set by the
Federal Reserve, which has dropped significantly, and interest rates charged by
card issuers to consumers. In 2001, the
Federal Reserve cut interest rates by 4.75%, but major bankcard issuers cut
their rates by only 1.35% on average.
Credit card issuers earn about 75% of their revenues from the interest
paid by borrowers who do not pay in full each month. Several companies have even attempted to
instituted charges or cancel credit cards for customers who pay in full each
month, preferring customers with large credit balances who pay minimum monthly
payments. Using a typical minimum
monthly payment rate on a credit card with 18% APR, it would take 34 years to
pay off a $2,500 loan. Total payments
would exceed three times the amount of the original principal. It would take a family with a balance of
$10,000-the national average-more than 57 years to pay off at a typical
;minimum rate, with total payments just under four times the amount of the
original principal. Credit card
statements, unlike those for mortgage and car loans, do not disclose the
amortization rates or the total interest payout at the minimum payment
rate. In fact, major credit card lenders
successfully sued to block the state of California
from requiring them to disclose this type of information to credit card
consumers. Industry consultants estimate
that credit card companies would cut their bankruptcy losses by more than 50%
if they instituted minimal credit screening.
6. What is the difference between
chapters 7 and 13? Chapter 7 is used for
those with substantial unsecured debt problems.
Generally, a family that files for chapter 7 bankruptcy is relieved of
repaying its short-term, high-interest unsecured debt, principally credit card
debt, along with some medical bills.
After bankruptcy, however, the family must continue to make all payments
on the family home, including interest, late charges and penalties, or they
will lose their home. Any other debt
secured by a home mortgage or home equity loan also must be repaid. These debtors must continue to make car
payments, pay back taxes, and satisfy educational loans. Those who have outstanding child support or
alimony obligations must also pay those in full. chapter 7 is not total debt relief. Debtors often leave bankruptcy court with
heavy financial obligations. For
those debtors who can afford to reorganize and pay some money to their
creditors, chapter 13 provides a well-defined and accessible method to adjust
those debts. It is also the only way
families in bankruptcy can cure defaults on home mortgages or pay defaulted car
loans to avoid losing their homes and their cars. Debtors who file for chapter
13 voluntarily agree to pay some portion of their debts over a three to five
year period. Despite the good faith of
those who choose this approach, the reality is that two out of every three
debtors who file for chapter 13 do not make it through the repayment plan. many face repeated unemployment and some
encounter significant and unexpected expenses.
7. Much has been made of the
"means test" for chapter 7 in HR 333. But I've been told by the
credit industry that HR 333 won't hurt honest families of modest and low
means. that's simply not true. Virtually all of the dozens of consumer
provision in HR 333 apply to all debtors in bankruptcy, not just those above
median income. Here are just some of the
provisions that would make it difficult for those of modest and low means to
successfully file for chapter 7:
Definition of Household Goods -
This provision would allow finance companies who take security interests in
families' household goods (not purchased with the money loaned) to threaten to
repossess household items that have little or no resale value, but high
replacement value, in order to coerce debtors to enter into agreements to pay
debts that would otherwise be eliminated.
Restricting the Automatic Stay of
Evictions - The bill would virtually eliminate the stay of tenant evictions in
current law that gives bankruptcy debtors, once they have eliminated most other
debts, a chance to catch up on back rent.
Burdensome Paperwork Requirements
- The bill would require all debtors to provide numerous additional documents,
which will increase the cost of filing for every debtor. Some of these documents, such as tax returns
and pay stubs, may be difficult for debtors to obtain if they must be obtained
from a former employer or a hostile ex-spouse.
In addition, the bill would allow creditors to continue to harass
debtors if they do not receive "effective notice" at an address that
debtors may not be able to obtain (or that may be time-consuming for their
attorneys to obtain), even if they have actual notice of the bankruptcy.
Eliminating Protections for
Mobile Home Residents - The bill would eliminate chapter 13 protections for
mobile home residents, and would often require them to pay far more than their
mobile homes are worth to prevent loss of their homes.
Providing Multiple Opportunities
for Creditors to Threaten Litigation - The bill creates numerous opportunities
for creditors to bring or threaten to bring litigation against debtors, based
on new provisions that allow creditors to seek dismissal of cases, repossession
of property, or to prevent discharge (liquidation) of debts. families who cannot afford the $1,000 or more
it would take to defend against such actions will have no choice but to give in
to creditor payment demands.
8. As I understand it, HR 333
seeks to put more people into chapter 13. What's wrong with that? Encouraging
people who can afford to file chapter 13 makes senses. Putting them into a program that is doomed to
failure for most people--as HR 333 does - is a recipe for disaster. HR 333 not only won't improve the dismal
success rate in chapter 13, it will increase the number of people who
fail. Before fundamentally altering
chapter 13, shouldn't we figure out why so many plans fail today and design a
better approach? the trustees who currently administer chapter 13 plans have
said that HR 333 contains many fundamental flaws that will increase the number
of plan failures. HR 333 requires a
five-year payback period from all debtors over state median income, squeezing
more payments from the debtor and increasing the change of failure by greatly
lengthening the time the family will be vulnerable to income interruptions or
emergency expenses. Moreover, these
families' payments to creditors would be determined by the arbitrary means test
using Internal Revenue Service expense standards, which may bear no relation to
their true expenses. In addition, under
HR 333, many creditors who are treated as unsecured under current law would
become secured, and others would be deemed secured for larger obligations. that is: secured and unsecured creditors
would be entitled to greater repayment
of their debt. That means the size of the repayment plan would be bigger even
though the debtor's income on average would not grow.
Moreover, because HR 333 would
prevent a debtor who cannot pass the means test from being eligible for a
chapter 7 case, if the chapter 13 plan fails, the debtor is removed from
protection of the courts, subject to loss of his/her home, car, household goods
and likely to be continually harassed by creditors.
9. So you're saying that HR 333
would accomplish exactly the opposite of what its supporters claim. The credit
industry says it wants debtors to repay more of their debts in chapter 13, but
the bill would make that outcome less likely.
How did that happen? Early on, some secured creditors realized that
there was an opportunity to gain ground on the current system, which already
provides secured creditors a preferred position. Led by the auto lenders, they
obtained special interest provisions that, as described above, create a lot
more secured debt for the debtor. this
creditor feeding frenzy was detailed in an editorial in a leading bankruptcy
journal, which asked: "Why Does Congress want to Kill chapter 13:"
and which noted that "bankruptcy reform has been hijacked by car
lenders". Bankruptcy judges, trustees and scholars have been outspoken
about the destructive nature of the type of changes to chapter 13 proposed by
HR 333. In fact, some opponents of HR 333 believe the real agenda of much of
the credit industry is to keep debtors out of both chapter 7 and chapter 13,
eliminating the protection of the courts.
10. The bill's proponents say it
will hep women and children who are dependent on
child support. Is that true? No, for three major reasons. First, supporters of
the bill claim that it "puts child support first" because women owed
child support will be first in line among unsecured creditors if there are
assets to distribute in a chapter 7 case.
However, even today, with no means test limiting access to chapter 7,
over 96% of chapter 7 debtors have no assets to distribute, according to the
Department of Justice. The bill will let
women and children wait at the head of the line in chapter 7 - to receive
nothing. Second, after bankruptcy, women trying to collect support will face
increased competition from credit card companies and other creditors. Under current law, child and spousal support
are among the few debts that survive bankruptcy. Under HR 333, more debts - especially
high-interest credit card debt - will continue after bankruptcy, putting women
and children owed support in competition with the sophisticated collection
departments of commercial creditors for the debtor limited income. Being
"first priority" during the bankruptcy process is legally irrelevant
the minute the bankruptcy proceedings end. Third, as described above, changes
in chapter 13 will mean that many creditors will be entitled to larger payments
from the debtor's limited income - so payments of past-due child support will have
to be stretched out over a longer time period.
11. Does the bill fix the
homestead laws that allow wealthy debtors to
keep their multimillion dollar mansions in certain states like Florida
and Texas, even if they pay
creditors nothing? No. Today, state law
determines what property shall remain exempt from creditors in a
exemptions are highly variable. six
states (Arkansas, Florida,
South Dakota, Texas)
and the District of Columbia now
have literally unlimited exemptions, while twenty-two states have exemptions of
$15,000 or less. the central purpose of creating a uniform federal cap on the
"homestead exemption," which was adopted by an overwhelming vote in
the Senate, was to fix this fundamental injustice. Residents of one state should not be allowed
to protect an asset worth millions, while residents of other states cannot even
protect the least expensive home. Allowing this inequity is of even greater
concern when it is part of a bill that creates so many harsh new barriers to
bankruptcy for moderate-income Americans.
The "compromise" proposal in HR 333 would cap the equity of a
home that can be shielded from creditors only for persons liable for a very
limited number of frauds and felonies.
Even then, the cap would be $125,000 per person [$250,000 per couple]. A
diverse group of professors who teach bankruptcy and commercial law, wrote to
urge change to this HR 333 provision.
they said: "The compromise proposal does not cure the homestead
problem. Although the homestead
compromise was reach in good faith and with good intentions, its modest
improvements are overwhelmed by the negative consequences it will have ... On
balance, the compromise compounds the unfairness of the homestead exemption. Instead of offering a hard, uniform cap that
brings the state exemptions into closer alignment, the proposal makes it more
difficult for people to use any homestead exemptions."
12, It's my understanding that HR
333 requires debtors to undergo credit counseling before they file for
bankruptcy. what's wrong with that? There is nothing wrong with encouraging
people to seek credit counseling. Given
the serious consequences associated with bankruptcy, most people consider it a
last resort to be tried when all else has failed. Indeed, debtors usually seek
out credit counseling and/or attempt to make special arrangements with their
creditors to repay their debts before ultimately filing for bankruptcy. However, there is a reason to be concerned
about the specific credit counseling provisions in HR 333, which deny access to
the bankruptcy system in virtually all cases until a debtor has sought the
assistance of a credit counseling program.
Although the legislation seeks to ensure some measure of creditability
with respect to the credit counseling organizations by requiring that they be
approved by the local trustee or bankruptcy court, the conference report does
not authorize funds to investigate these agencies, their fees, practices or
success rates. This will make it much
harder to prevent shady operators from getting placed on the approved list
maintained by the courts and trustees and to ensure ongoing compliance by these
counseling organizations with the requirements of the law. Newspapers and television news shows have been
filled of late with stories about credit counseling scam artists, and
"non-profit" counseling organization that charge high fees and pay
their officers "for profit" salaries.
A number of states have enacted or are considering tougher oversight
of credit counseling agencies. Most experts in the field acknowledge that it
is getting much harder for consumers to find high-quality assistance that
offers a range of counseling options, as opposed to a "one size fits
all" consolidation plan that only helps some consumers get their finances
under control. As with chapter 13 plan, credit counseling consolidation plans,
in which the debtor pays the agency and the agency pays most creditors, have a
high failure rate. Debtors who fail to
complete a consolidation plan have a good change of ending up in
bankruptcy. In addition, the cost of
credit counseling has risen significantly in recent years. Although the
conference report attempts to ensure that counseling fees are reasonable, the
credit counseling requirement will place debtors with extremely limited funs in
the position of having to use money that would otherwise go to debt
repayment. additionally, some debtors
will only learn about the credit counseling requirement upon seeing a
bankruptcy attorney. this is often too
late int eh process for credit counseling to make a
difference. As mentioned above, many debtors delay filing for bankruptcy well
beyond when it would make economic sense.
It will only be upon make the difficult decision to seek bankruptcy that
these people would be told that, first, they must receive credit
counseling. At this point, credit
counseling is unlikely to help the debtors in the most financial trouble, and
the delay in filing for bankruptcy may actually harm them. HR 333 does not give
bankruptcy judges enough discretion to ensure that debtors facing an emergency,
such as the imminent shut off of electricity, will be able to file for
13. Finally: The consumer credit
industry claims that bankruptcies are costing each American family $400 per
year. Is that true? Absolutely not. This claim has obvious rhetorical appeal, but
no basis in fact. A lengthy article in the American Banker reveals the
unsubstantiated origin of the number. It
is not the bankruptcy system that causes creditors' losses. Indeed, the credit industries' own studies
concede that a majority of consumer in financial trouble will not be able to
pay their debts, whether or not they file for bankruptcy. On the other hand, some borrowers who file
for chapter 7 relief pay some of their debts in spite of the fact that they can
legally wipe them away. the industry
wants you to believe that it is the bankruptcy system that causes them to have
to write off some loans, not their own bad business decisions. Equally important, there is no evidence that
lenders would reduce rates on unsecured consumer lending if they could avoid
these bankruptcy losses. In recent
years, credit card profits have been largely driven by the increasing
"interest rate gap" between the benchmark rate set by the Federal
Reserve, which has dropped significantly, and interest rates charged by card
issuers to consumers, which have dropped by far less. Given this, how likely is it that additional
savings realized by lenders will be passed on to consumers? The simple truth is
that bankruptcy laws do not result in an increase in the cost of credit for
bill-paying consumers. Credit card companies have never show that interest
rates have risen or fallen due to increases or decreases in bankruptcy filing
rates or changes in bankruptcy laws. In
fact, it can be argued that the high interest rates and the various and
substantial penalties paid by marginal borrowers on their outstanding balance
each moth subsidize the cost of credit for all borrowers who pay their credit
card balance in full each month.
If you find after reading this
material (and from your own experience) that congress and the media have
misrepresented bankruptcy reform, you might let your Senators and Congressmen
know what you think and how it might affect their re-election chances. Who knows, if enough people complain we might
actually get true bankruptcy reform someday.
South State Street
Lake City, Utah 84138
South State Street, Suite 4225
Lake City, Utah 84138-1188
South University Ave, Suite 319
East Morris Avenue #235
Salt Lake, Utah 84115
It is common for Bankruptcy
clients to have questions about their case and/or the decisions that they need to make. Please
be aware that while the attorney’s employees can help you with many matters,
they are not allowed to give you legal advice. Certain matters can ONLY be
handled by an attorney. For example, only an attorney can give you advice
whether or not it is in your best interest to file Bankruptcy. Whether or not it is in the best interest of
your spouse to file Bankruptcy with you.
Or, if Bankruptcy filing is advisable, only the Attorney can indicate
which Chapter of the Bankruptcy Code you should file under. In short, any legal
advice requires the assistance of the attorney. A paralegal may not: (1) accept an individual
as a client, (2) set fees, (3) give direct legal advice, (4) negotiate legal
matters on behalf of a client, or (5) represent clients in court settings.
However, subject to these restrictions, a legal assistant or paralegal can do
almost anything else that an attorney could do.
If you have a question regarding
your case, you should first look for the answer in this booklet. If you do not
find the answer, please call our office. Ask for the Paralegal in charge of
your type of case. If it is a procedural question (such as wanting to know when
your hearing date is or if a reaffirmation agreement has arrived) she will help
you with those matters. If it is something she cannot handle, provide her with
all of the information, and the attorney will then help you.
shows that many Utah women work simply to get out of the home and that more
women per capita in Utah with children work than their counterparts with
children outside of the state.