After the way the Associated Press mischaracterized NACBA's findings earlier this year, it shouldn't come as any surprise that an AP reporter this week wrote that the paperwork hurdles in Chapter 7 bankruptcy have "become insurmountable". You can find the original article in the Sun News; we wanted to share with you the response of consumer bankruptcy attorney Sheryl Schelin.
October 16, 2006
Editor
The Sun News
Via Email Only -
To the editor:
In a recent article, Marcy Gordon (AP) tries to convince American consumers that the 2005 changes to the Bankruptcy Code have led to "insurmountable" obstacles barring them from filing for bankruptcy protection. While I am no fan of the new law - the gallingly-named Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA, or "Act") - I cannot allow the portrait painted by Ms. Gordon's article to go unchallenged.
Consumers deserve to know the truth about their rights, free from the gloss of collection industry deception. This Act, as Ms. Gordon essentially acknowledges, was the creation of that industry, lobbyists for which peppered Congress with horror stories about greedy, lying debtors who hide piles of cash from the hardworking, honest creditors. Never mind that such abuses were so rare as to be inconsequential, statistically speaking, or that creditor abuses were arguably more numerous (and yet remain unaddressed). Despite this bad law (both in underlying policy and in execution), consumer bankruptcy attorneys want the public to know that bankruptcy relief is still available.
Ms. Gordon quotes Lawrence Brooke, a DC-area attorney, as saying of the new law, "It's a help-the-banks, squish-the-little-guy law." While I don't disagree with Mr. Brooke on this point, I would hardly qualify the paperwork required as "insurmountable." Any bankruptcy filing requires the debtor to understand thoroughly his financial life. This can be intimidating for many debtors, but it's a step all debtors need to take in some context, if they want to escape the overwhelming pressures such oppressive debt causes. When aided by legal counsel, the debtor will find this process to be actually empowering.
True, attorneys who dabble in bankruptcy may end up reevaluating their business practices. The new laws make it imperative for debtors to receive counsel from qualified attorneys who focus on these areas, keep up with the rapidly developing state of the law, and can advise consumers specifically (as opposed to business interests, which are covered by other chapters and different rules).
Ms. Gordon's article cites filing statistics in support of her claim that the Act is scaring away debtors. Contrary to Ms. Gordon's claims, numbers tell only one small chapter of the story in this case. The 2005 filing numbers were, many believe, artificially inflated: the credit industry created media buzz that the new law would make it nearly impossible for debtors to seek relief. Ironically, the industry's efforts backfired, creating a mad rush to the courthouse in the months immediately preceding the new law's effective date. Further, anecdotal evidence from many of my colleagues in other parts of the country suggests that filings might be climbing back to pre-BAPCPA levels.
Most importantly, the decline in filings this year, I believe, reflects a massive disinformation campaign being waged on "the front lines" of the war against the American consumer. Time and again I hear the same stories from fellow consumer bankruptcy attorneys and their clients who report conversations with aggressive debt collectors that appear to be reading from the same script all across the country - a script appalling in its blatant disregard for the truth and overwhelming in its obvious disdain for the consumer's intelligence:
- "Bankruptcy is no longer available - Congress repealed it."
- "You're not eligible for filing bankruptcy, and I have proof." (Interestingly, when pressed to identify or produce that proof, the collector declines.)
- "You own a home, so you can't file for bankruptcy. That's illegal."
- "You will never get credit again if you file for bankruptcy."
- And my personal favorite: "If you file for bankruptcy, you'll be committing a crime."
To make this as plain as possible: Bankruptcy relief, while admittedly subject to new obligations and requirements, is most certainly still available. Consumers are not ineligible to file for bankruptcy relief simply because they own a home. Nor will the vast majority of consumer debtors facing bankruptcy lose all their property, or forever be denied credit as a result of the filing for bankruptcy. And finally, merely filing for bankruptcy in and of itself will not result in the debtor being subject to criminal prosecution, without intent to defraud, an overt act of perjury in the schedules or other papers filed, or some other specific, distinct criminal act.
The proponents of the Act hold a view that would be laughable if it hadn't led to such absurd results. The irony is that the Act will not achieve the goal of reducing filings in the long run, for one very simple reason: it does nothing to address the real cause of rising filing rates - the underlying oppression of the working poor in America. Rising medical costs, wages that do not keep track with rising costs of living, serious illness and injury, debtor harassment, greedy collectors who try to collect the uncollectible (even going so far as attempting to collect debts long since extinguished by discharge or by the expiration of the statute of limitations), the loss of jobs to overseas markets - these and other contributing factors remain. But so does bankruptcy protection, and that is most definitely a very good thing for the vast majority of consumers who, contrary to Congressional views as evidenced by the new law, are honest, hardworking, and well-intentioned people trying to do the best they can under next-to-impossible circumstances.
And because Congress makes me say it: I am a federally designated debt relief agency. I help people file for bankruptcy under the laws of the United States. And I am proud of it.
Sincerely,
Sheryl Schelin
