Interview with Kathleen P. March, former US Bankruptcy Judge
Date: Sat, 05/03/2008 - 10:26
Why do you think so many consumers are filing bankruptcy?
Miss March: The American Bankruptcy Institute reported on 5/1/08 that U.S. consumer bankruptcy filings increased 47.7 percent nationwide in April from the same period a year ago, relying on data from the National Bankruptcy Research Center (NBKRC). The overall April consumer filing total of 92,291 also represented a 7.1 percent increase from the 86,165 filings in March. This is a HUGE increase in bankruptcy filings. Obvious reasons for this HUGE increase in the number of people filing bankruptcy include rising unemployment, credit card interest rates of 20-25% or more, decreasing real property values nationwide (while adjustable mortgage interests adjusted UP, increasing monthly mortgage payments on houses that were losing value). Most individuals who owe $30,000 or more credit card debt can barely make their monthly payments, and making those monthly payments does NOT reduce the total balance they owe, and in some cases that balance keeps increasing. Eventually, the load of credit card debt, plus in some cases medical debt, plus in some cases failed small businesses, plus in some cases adjustable interest rate mortgage payments that adjusted up to the point where the person cannot pay them, results in the consumer making the decision to seek the "fresh start" provided to individuals by the bankruptcy discharge, which makes general unsecured debts of various types permanently unenforceable against the individual who receives a discharge.
How do you feel about Chapter 7 versus 13, which option is better in your opinion?
Miss March: For the majority of consumers, Chapter 7 is preferable, because Chapter 7 is the only Chapter (kind) of bankruptcy where the debtor does not have to do a repayment plan for a period of years (usually 5 years, but sometimes 3 years), to try to repay credit card debt, medical debt, and other unsecured debt. In Chapter 7, a debtor can seek to discharge credit card debt, medical debt, and certain other kinds of general unsecured debts. Discharge means make permanently UNENFORCEABLE against the debtor as a personal liability of the debtor. However, only consumer debtors who can pass the "means test" (form 22 of bankruptcy official forms) can file Chapter 7. Also, for some debtors, Chapter 13 or 11 can do things that Chapter 7 cannot do, such as allow debtor to pay off an arrearage on the debtor's real property(ies) over a 60 month repayment plan.
Who should (and should not) file bankruptcy?
Miss March: There is no "one size fits all answer" to that question, which is why my law firm, The Bankruptcy Law Firm, PC, offers a "free first consult to tell you whether our law firm can help you" to every person or business considering filing bankruptcy. Phone our firm 310-559-9224 or access our firm website at www.BKYLAWFIRM.com
What are the factors one should consider prior to filing bankruptcy?
Miss March: Factors include, total debt versus ability to pay, what debts will be dischargeable/nondischargeable in bankruptcy, what assets will the individual be able to exempt if the individual files bankruptcy versus what assets will the individual NOT be able to exempt, will the individual be eligible for a bankruptcy discharge at all, can the individual consumer detour pass the "means test" (form 22 of bankruptcy official forms), which a consumer must pass in order to be able to file Chapter 7 bankruptcy without the Office of USTrustee moving to dismiss that Chapter 7 as constituting "abuse" of Chapter 7, which chapter is suitable for the particular financial problems of a particular debtor, etc.
If a husband files bankruptcy will it be reported on his wife's credit report too?
Miss March: My firm doesn't usually see that happening, but lawyers don't control what credit reporting agencies do, so it could happen.
Is it possible to establish one's credit after filing for bankruptcy?
Miss March: If yes, then what are the ways that would help one build his or her credit? The Bankruptcy Law Firm, PC ONLY does bankruptcy work. We do not advise on "rebuilding credit". We encourage our clients to get a bank account with a debit card, and use the debit card, instead of getting back into debt after they get a bankruptcy discharge, by accepting and using more credit cards.
Is there still a stigma associated with bankruptcy?
Miss March: Less and less. 1 of every 10 people in the US files bankruptcy at some time or another during their lives.
Many people think that bankruptcy is a way to cover up one's bad spending habits or poor money management skills?
Miss March: Most consumers do not intentionally overspend. Some consumers overspend, or over-use credit cards, by mistake, because they don't understand the impact of credit cards running interest at 20-25% per year until they owe so much they can't pay it back. Bankruptcy may solve that problem once. But a debtor who receives a Chapter 7 bankruptcy discharge cannot file a second chapter 7 case and seek a discharge in that second chapter 7 case unless it has been over 8 years between when the first chapter 7 case, and second chapter 7 case, is filed. In addition, since 2005, debtor education during bankruptcy is required for all individual debtors, in their bankruptcy cases, before they can get a discharge in any chapter of bankruptcy. These factors together should cut down on people continuing to "overspend" or "overborrow".
If a person inherits an amount between the time the petition is filed and the time of hearing, does he or she have to report to the bankruptcy court regarding the inheritance?
Miss March: If a person files bankruptcy and someone dies within 180 days after the bankruptcy case is filed, what the debtor inherits from the decedent becomes property of the debtor's bankruptcy estate, and the creditors/trustee get that money, up to amount necessary to pay all allowed claims 100%. Yes, there is a duty to tell trustee if this happens.
Can a person file bankruptcy on his own?
Miss March: Individuals can file bankruptcy "pro se" (means without any attorney), but its very hard to be successful doing so, and many such cases get dismissed, with no discharge. It is well worth the money to find and pay an experienced consumer bankruptcy attorney to represent you to do your bankruptcy case. There is too much at stake to try to do it "pro se".
Miss March has been included in the Community Attorneys and Law Firms section.
Miss March: If yes, then what are the ways that would help one b
Miss March: If yes, then what are the ways that would help one build his or her credit? The Bankruptcy Law Firm, PC ONLY does bankruptcy work. We do not advise on "rebuilding credit". We encourage our clients to get a bank account with a debit card, and use the debit card, instead of getting back into debt after they get a bankruptcy discharge, by accepting and using more credit cards.
I absolutely, possitively, 100% agree with this statement! Good interview, I found it very interesting.
For me most consumers are filing bankruptcy just because with ex
For me most consumers are filing bankruptcy just because with excess debt have acquired their debts over long periods of time. While they intend to repay the debts, they may find themselves unable to do so because of unanticipated changes in circumstances such as failed businesses and etc. Any of these circumstances, combined with late fees, over limit fees and the extraordinarily high interest rates that creditors now charge can result in insurmountable debt.That's why they required to hire a bankruptcy attorneys for them to know on how to do.
Nice interview and good advice. I finally learned my lesson.
Nice interview and good advice.
I finally learned my lesson. My mother told me this when I was a teenager but, of course, I didn't listen then. Her exact words, "unless it's a house or a car, if you don't have the cash to pay for it, don't buy it!" Now that I'm digging myself out of debt, I intend to never go back. I know sometimes circumstances beyond our control (job loss, divorce, huge medical expenses, etc.) happen but, many times we get ourselves into debt up to our eyeballs simply because we want something we can't afford so, we charge it. This can escalate quickly. You pay the minimum payment on your card and then miss one payment and your interest rate gets jacked up to 30% and you're stuck...all because you wanted some designer clothes, or a PS3 for your kids for Christmas or a big screen TV.
Like I said, I've learned my lesson.
Great interview. A lot of consumers as mentioned place things on
Great interview. A lot of consumers as mentioned place things on credit cards without knowing the impact that the high interest rate will have on their ability to pay back the debt. In addition there are a lot of situations that arise for people that impact their ability to pay back the debt. Loss of employment, disability, medical problems all contribute to their ability to pay back outstanding credit card balances. Once someone defaults the common policy for many credit card companies was to increase the interest rates on the cards which only worsened an already difficult situation. People in this situation should have their financial situation reviewed by an experienced bankruptcy attorney to determine if bankruptcy is a good option for them.