June 20, 2018
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Bankruptcy is Abolished?

Remember last fall when all the TV lawyers were telling you to “act now before bankruptcy is abolished”? Well it is almost a year later and people are still filing bankruptcy in record numbers. What happened to bankruptcy reform that our country needed to stop the abuses of bankruptcy? When you think about combining the two greatest scam artists, lawyers and politicians, it is no wonder that the new reform bill is failing. Of course they will blame something or someone else for the disaster.

Hurry now before it is too late. That was the battle cry for the TV attorneys advertising their bankruptcy legal services last fall. What they did not tell you is that bankruptcy was never going to be abolished. It should be but it never will. By the time the politicians, most of them lawyers, and the lawyers themselves put in their political action changes, the bill was a complete waste of time and effort. Fact is they were playing on the hype to get thousand of new customers to pay them to file bankruptcy. There were two new significant changes to the bankruptcy law which fall into the category of common sense, but not much else.

The first change was that the bankruptcy attorney had to verify the balance of the debt that they were trying to discharge through the courts. Wow! You mean they have to find out how much the customer owes when they file court papers? In the old days they were allowed to estimate the balance owed and save a lot of time not following up with creditors. Now they must verify the balance; common sense.

The next change was to be the holy grail of changes to stop abuse and end the cycle of consumers filing bankruptcy just to get out of paying their bills. They had to go to a licensed nonprofit credit counselor to seek out options to their financial problems. The problem is that if the credit counselor found options to avoid bankruptcy the consumer did not have to follow the advice. And since they met with the bankruptcy attorney first and probably left a deposit, they had no interest in hearing options to repay their debt. The bankruptcy attorney already painted a picture of how good everything will turn out after they get out of repaying all their bills. If the credit counselor prepared a written plan to get the person out of debt and avoid bankruptcy, the attorney can still file bankruptcy, and the licensed counselor has absolutely no say in the matter. Now that really does not make any sense.

In fact, if the consumer does not or cannot pay the $25.00 fee for the counseling, the credit counselor must do it for free. But the attorney is still going to get his $ 800.00 to $1,200.00 for filing the papers with the court. And the court trustee will make a high percentage to process the payments if some sort of court ordered repayment is ordered such as a chapter 13. Sounds like the same good old boy network to me.

Don’t get me wrong, there are a few situations that bankruptcy is inevitable. But the vast majority of the bankruptcy filed today could be avoided with a little simple common sense budget planning. I see people every day that have the ability to repay their debts but want to take the easy way out and file bankruptcy. In a way, our society has made it so acceptable and easy, but there is a downside to filing bankruptcy. Don’t do it!


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