“Bankruptcy isn’t something I wanted to do, and I avoided it as long as I could – probably longer than I should have. But I’ve come to terms with it. Simply put, I made mistakes. Every person on this planet makes mistakes. We are all faced with choices, and we have no way of predicting how the future will unfold. Should I change jobs? Should I buy this car? Should I consider this surgery? Every choice we make has consequences, and there’s no way to know for sure that we’re making the right choice. All that we can do is live and learn, and try our best not to repeat the same mistakes in the future.”
Today’s blog entry is a little different. Although the topic has quite a bit of overlap with bankruptcy, it is not a bankruptcy article per se, but instead speaks to a much broader issue.
I can’t begin to tell you how many times one of my bankruptcy clients has admitted to me that they put off filing for bankruptcy for years because of intense pressure to avoid bankruptcy – usually from family or friends. It’s safe to assume that for every person who finally has the courage to declare bankruptcy, there are undoubtedly many more people who refuse to get the assistance that they need out of a misplaced sense of pride.
There are many different ways in which societal norms can have detrimental effects on individuals, because they are discouraged from getting help because of the stigma attached to it. Of course, this isn’t a new revelation to me, or (I imagine) anyone else reading this article.
Recently, I’ve had the privilege to begin volunteering with a youth suicide prevention organization. My involvement with this group has opened my eyes to just how broad and deep some of these social stigmas go – and how many of them we take for granted without thinking of them, without questioning their value, and without challenging their validity.
It is possible to cause someone great psychological harm without intending to do so, and even without overtly insulting remarks. For instance, many educators and parents discourage the use of the word “retard”, even when used in jest. LGBT youth can feel marginalized by phrases like “that’s so gay” or even assumptions that they should be dating someone of the opposite gender. Many people in need of counseling for mental health are discouraged from doing so because of the connotation that people who visit psychiatrists are “crazy”. And of course, people are steered away from bankruptcy based on the idea that “if you incur a debt, you’re responsible for paying it”.
Of course, I don’t intend to suggest that people should incur debt without any intention of paying it back. However, most people who are insolvent are that way due to mistakes or even events that are out of their control. Isn’t the state of insolvency punishment enough? Should people really be forced into poverty for the rest of their life to repay debts that they’ll never get caught up on?
What right does anyone have to sit in judgment of someone else? To assume that just because they have enough money to pay their bills, that everyone else must have enough money to pay their bills? To assume that just because they’re enjoying a happy and healthy point in their life, that people with problems shouldn’t seek out a counselor?
Most people cannot fully appreciate just how much power certain words, phrases, and assumptions can have on other people. Even the most innocuous and benign words can have a major impact.
We live in a society that treats mental illness as somehow less important than physical illness or injury. We teach kids a silly rhyme about “sticks and stones”. But these words and presumptions can hurt and do serious harm. They marginalize. They stigmatize. And they invalidate.
People who discourage some of the things I’ve mentioned are often called overly-sensitive or zealously politcally-correct. I admit, I used to think that, too.
But I’ve seen just how detrimental these stigmas can be. So today, I write this post to implore people to be less judgmental, to be more conscientious about the words you use and the assumptions you make.
If you’re depressed – there is no shame in consulting a psychiatrist. If you’re gay, there are places to find love and support. If you’re struggling with debt, talk to a bankruptcy attorney. Don’t let the opinions of narrow-minded people deter you from getting help.
There are plenty of resources out there, no matter what you may be dealing with. But you must take the first step, and liberate yourself from these social stigmas.
For most people – bankruptcy is seen as an option of last resort. In fact most people won’t consider bankruptcy at all, even if they really really need to file. Those who finally decide to file bankruptcy often must first make peace with their own guilt and decades of conditioning. Many of my clients express massive apprehension about filing for bankruptcy. “In my family,” they often say, “we were taught that if you incur a debt, then it’s your responsibility to pay the debt.”
Certainly, most of us can identify with that sentiment. And there’s nothing wrong with it… unless – of course – it is treated as a moral absolute.
Moral absolutes are a dangerous thing. Absolutism ignores any possible extraordinary circumstances that might warrant a behavior that is otherwise discouraged, and denies people the right to consider such factors in their decision-making. For instance – many people would agree in a moral absolute against taking someone else’s life. But many other people would argue that even killing may fall into a moral grey area where self-defense is concerned. If something as serious and final as death can have moral grey areas, then certainly there must be exceptions and circumstances that warrant bankruptcy.
One person – preparing to file for bankruptcy – expressed the following…
And sometimes, it’s not even about making mistakes. Even the most cautious among us can be brought down by events beyond our own control. Most bankruptcy filers experienced some catastrophic event – a major medical expense or automotive repair – that made bankruptcy unavoidable. Through no fault of their own, circumstances (and by extension, their debt) snowballed out of control.
There’s nothing wrong with parents teaching their children to be responsible, and to pay back debts that they have incurred. Nor is there anything wrong with children wanting to live up to that ideal. But life rarely goes according to plan. When circumstances warrant, people have a duty to themselves. There’s a huge difference between intentionally screwing your creditors and doing what it takes to put food on the table. Don’t deny yourself a valuable tool such as bankruptcy.
“I was taught growing up that if you incur a debt, you’re responsible for paying it.”
“I always pay my bills. I never wanted to have to file for bankruptcy.”
“I could have avoided this if only my credit card company would drop my interest rate.”
Despite all of the jokes and political rhetoric about people who welch on their debts, deadbeats, welfare recipients, the “moocher class”, etc., the fact of the matter is – the stigma associated with bankruptcy and not paying one’s bills is extremely prevalent. These are ethical principles that are ingrained into our minds at an early age, and difficult to overcome.
Unfortunately, some people get so bogged down by these dogmas, that they delay doing anything about their finances until it’s too late – and they are faced with imminent invasive collection actions such as wage garnishments, bank levies, utility shut-offs, lawsuits, repossessions, and foreclosures.
Instead of getting the fresh start they needed, they dragged their heels until their debts spiraled out of control.
For those of you that believe that bankruptcy is morally repugnant, I urge you to consider Chapter 13 Bankruptcy.
Some debtors are required to file for Chapter 13 instead of Chapter 7 because they are ineligible to file Chapter 7 due to a prior bankruptcy or their income disqualifies them. Others file Chapter 13 to obtain extra protections for assets or to avoid foreclosure.
As your bankruptcy attorney, I owe you a fiduciary duty. In the past, I’ve discouraged people from filing Chapter 13 unless they absolutely had to. Let’s be honest – Chapter 13 is longer, more difficult, and requires adherence to a disciplined budget. But if someone insists on filing Chapter 13 strictly for moral reasons, I would rather they do that than not do anything at all, which would only make financial matters worse in the long run.
What is Chapter 13? Generally-speaking, it is a 3 to 5 year debt consolidation and repayment program. We take all of your debts, pool them together, and break them up into different categories. Based on the types of debts you have and the circumstances of your case, certain types of debts must be paid in full while most of your debts are paid pennies on the dollar. That percentage is based primarily on income, but sometimes other non-income factors come into play. The unpaid percentage is usually discharged (with the exceptions of certain non-dischargeable debts, such as student loans) just like in Chapter 7 Bankruptcy.
Debts that are not dischargeable in Chapter 7 Bankruptcy – such as domestic support obligations, taxes, and student loans – can be rolled into and paid in a Chapter 13 Bankruptcy. Virtually everyone qualifies for Chapter 13 Bankruptcy (there are debt limitations that few people ever come close to breaching – $383,175 unsecured debt and $1,149,525 secured debt, as of the date of this post).
And if you absolutely, positively are unwilling to do bankruptcy at all, consider alternative debt relief options, such as Chapter 128 or our Budget Counseling Services.
Occasionally (more often than I like), I will get a client who wants me to keep a secret from their spouse. You would think that such a request wouldn’t be a problem, since people enjoy attorney-client privilege and confidentiality with their lawyers.
So long as I don’t represent the spouse, this is true.
Most people understand the concept of confidentiality pretty well. But not nearly as many of them understand how all of that changes in joint representation – meaning, when a husband and wife collectively retain an attorney. In situations like this, an attorney cannot be used as an instrument for keeping secrets between the two individuals that comprise the attorney’s client.
Let’s take a married couple – John and Jane Doe. Jane tells her attorney a secret, and asks that it not be repeated to John. More than likely, a conflict of interest now exists, certainly if the secret is material and significant to the subject of representation. The attorney may have an affirmative duty to inform John the secret insofar as the secret would affect John’s case, or John’s decision-making ability.
It’s important to realize that attorney-client privilege does not extend to the other person in the room. There can be no secrets in joint representation. If a client is insistent on keeping secrets, then the joint representation ought to be severed and the client needs to retain separate counsel.
Shame / Guilt / Desire to Honor Debts
Although there are some people out there who think they are entitled to a bankruptcy once every 8 years, and file every 8 years like clockwork, most people try to avoid bankruptcy. They were taught by their parents to honor contracts, and that if you incur a debt, it’s on you to pay it. This is an admirable goal, and I’d be lying if I said I didn’t share that sentiment. But my role as your bankruptcy attorney is to ensure that you do what is in your financial best interests, and that you don’t have to repeat this again in the future. Sometimes, as distasteful as it may be, bankruptcy is the most fiscally responsible thing you can do for yourself. If you feel really, really bad about bankruptcy, visit a psychologist with all the money you’ve saved from the bankruptcy. Don’t make a bad financial decision based on a bad emotion. Chances are, that’s what landed you in financial troubles in the first place. Also, consider this. Say you have $20,000 in debt. You consider bankruptcy, but decide against it because you feel obligated to pay that $20,000 back. Five years later, you have been unable to get caught up. With interest, late fees, and penalties, your debt has now mushroomed to $40,000. You finally give in and file for bankruptcy. Now, instead of discharging $20k, you have to discharge $40k. Did you do the creditors any favors? No. Sometimes, the best advice is to nip a problem in the bud before it swells into something worse.
Fear of Being Outed
A lot of people are convinced that if they file for bankruptcy, their family, friends, and neighbors will all find out about it. Generally, this is untrue. Sure, bankruptcy is a matter of public record. Of course, all of your current creditors find out when they receive notice of your case from the bankruptcy court. People who have to pull your credit report, loan officers, landlords, etc. – they will know. Your employer, on the other hand, will not know unless they are a creditor of yours, you have a current wage garnishment, or you will be under payroll deductions for a Chapter 13 Plan. Same goes for family and friends – they’ll only know if they are one of your creditors. Bankruptcy is a matter in federal courts, not state courts. Therefore, it is not listed on free, public-access court case databases like CCAP. To find a bankruptcy case, you have to search on PACER, which is a fee and account based search engine. And generally, the only people who execute PACER searches are attorneys engaged in the same kind of work I am involved in. Bankruptcy cases are not published in any newspaper that I am aware of (high-profile celebrity or corporate bankruptcies sometimes make headlines, but we don’t do newspaper notices like they do in state court). Just remember that tens of thousands of people file for bankruptcy each year in Wisconsin. Chances are, you know someone who has filed for bankruptcy. You just don’t know that they filed for bankruptcy unless they feel like sharing that with you.
Fear of Losing Property
Many people fear that by filing bankruptcy, they lose all of their worldly possessions, or some other variation on that theme. I certainly can’t promise that you won’t lose something in a bankruptcy. However, events like that are relatively rare – usually reserved for the extreme cases where someone is sitting on an oil well or a gold mine. The vast majority of my clients lose nothing, except for their debt. They don’t make enough money to need to file Chapter 13, and they don’t own anything of sufficient value to pique the trustee’s interest. Of course, which category you fall under depends on the specific facts of your case, so talk to an attorney before convincing yourself that you’ll lose it all in bankruptcy.
I can’t file due to the new bankruptcy laws.
Rubbish. I wouldn’t be practicing bankruptcy if the new laws banned new filings. In 2005, Congress attempted to make bankruptcy more difficult to file, and did create laws that force more people into Chapter 13 repayment plans. But really, they weren’t very successful. In fact, I have found people qualifying for Chapter 7 who would not have qualified under the old laws. Congress made the process slightly more annoying, but only marginally so. It literally is something to sneeze at.
Obviously, if you’re in a position to file for bankruptcy, you’re probably not at home, rolling around in Ben Franklins. On the other hand – like everyone else in this world, we don’t work for free. Most Chapter 7 debtors average somewhere between $20,000 to $80,000 in unsecured debt. Even on the low end, the benefit to cost ratio is extremely high, especially when you consider the interest rates on most unsecured debts. I encourage you to shop around for the best value attorney. However, I do not recommend jumping at the lowest price tag. Remember – you get what you pay for. Know exactly what you’re getting for what price. Be especially careful that you know the full price – many attorneys just quote you their own costs, and leave off the court’s filing fees to make their price sound cheapest. Make sure you know about ALL of the fees, including the court’s fees, so that you are comparing apples to apples, not apples to oranges.