PERIL OF BANKRUPTCY AVOIDANCE

This year marks a milestone in my law practice. As you might imagine, I have seen a great many people in financial distress. When I started my practice in early 1972, bankruptcy was viewed as the equivalent of a serious crime. This is certainly no longer the case as the collapse of the American middle class continues.

One recurring event is many who wait, at great cost, for far too long before filing for bankruptcy. When I ask them why I hear ``I have always paid my debts on time; I have great credit and am proud of it; I am embarrassed and feel guilt; I understand that I won't be able to get new credit for seven years after the bankruptcy`` are the frequent responses.

So, they have continued to make the minimum payments and watched the balances grow. This often has a devastating impact on their standard of living and on their family life. A few, often with dire tax consequences, even borrow against or liquidate their 401 and other retirement savings plans. Many go to the internet, hire to debt consolidation outfits, and make a series of payments before they realize they are just treading water and things are just not working out with their debt reduction as was promised. And so the suffering continues.

The commonly held belief that once you file for bankruptcy you will never have another credit card account again is just wrong. Think about it... before filing debts are out of control and are often extremely high. After bankruptcy (a Chapter 7 bankruptcy takes a little less than 3 months to complete) you have no or little debts and you cannot file for another bankruptcy for at least 4 year possibly 8 years. You are now a better credit risk for the industry than before you filed, especially if you are gainfully employed and making a good income. ``Fresh meat on the table``, is the expression I use to describe how the industry views post bankrupts.