Chapter 7 Success Lawyers Chicago - Bankruptcy Attorney's Perspective
Bankruptcy Attorney's Perspective

One of the most rewarding things about being a bankruptcy attorney is the ability to help people. I am really not interested in how people got into debt. That fact really doesn't matter to me. Whether it was from an illness, injury, job loss, divorce, overspending, or simply bad financial decisions, the situation remains the same. It may become important going forward in the future to that person. He may not want to travel down the same road that brought him into bankruptcy. For example, someone who did not have medical insurance and has a chronic illness may continue to incur medical bills that are uncovered in the future. For that person, he needs to make a change in his life, so that he doesn't become a victim to debt in the future.

I am much more interested in how I can help this person get out of debt. The overwhelming majority of people qualify under Chapter 7 of the U.S. bankruptcy code. Chapter 7 is known as a fresh start or liquidation bankruptcy, however, not much ever gets liquidated. Most of the people filing for Chapter 7 bankruptcy have very little in the way of assets, very little in the way of income, in terms of being able to repay their debt and in fact, do receive a fresh start. In recent times, since the law change in October 2005, it has become more difficult for anyone to file a Chapter 7 fresh start bankruptcy case. That being said, the overwhelming majority of people approximately 85%, in fact, still qualify and receive a Chapter 7 bankruptcy discharge. The other 15% of potential applicants, are either not eligible for Chapter 7 or their Chapter 7 gets dismissed upon motion of the United States trustee. What happens in those cases is the person either switches to a Chapter 13 and does some form of reorganization under the Bankruptcy code or simply allows the Chapter 7 case to dismiss. That debtor is then eligible to possible file a bankruptcy at a later time in his life. The U.S. trustee’s office at the national and local level does keep statistics on how many chapter seven bankruptcy cases are dismissed and how much total that is determined to be non-dischargeable. What is still unknown is what percentage of that debt becomes collected in the future by the creditors.

What I think is happening is simply Chapter 7 debtors who are turned down are finding alternative ways to deal with the creditors and continue to live their lives. There is a percentage, of course, that will file a Chapter 13 bankruptcy and reorganize and pay the creditors something back (somewhere between 10% and 100%).

To do the work as a bankruptcy attorney has become much more adversarial in the last year or two. Since the law changed in October, 2005, the requirements that are placed on not only the debtor, but the debtor's attorney have become much more stringent. I routinely respond to requests from either the panel trustee or the US trustee regarding further documentation of items that have already been submitted. For example, let's say that I submit the most recent tax return, which I am required to do in a Chapter 7 bankruptcy case. I may receive a letter 20 or 30 days after filing from either the panel trustee or the United States trustee seeking two or three additional years of tax returns. On top of that, the panel trustee or the US trustee may want to see six full month's worth of paycheck stubs. Although the code only requires me to provide or for the debtor to provide the most recent 60 days of paycheck stubs just prior to filing, upon request of the trustee or the panel trustee or a creditor who files a proper motion, the debtor has to provide further documentation. Now this may not seem like a huge deal. Let me give you an example: if you have 10 cases per month that require a series of additional documentation, that involves contacting the debtor, acquiring the documents, copy the documents and forwarding them over. If you multiply those 10 requests per month over the course of a year, you are looking at quite a bit of additional man-hours to do the same job as before. Now I don't mean to say this in a complaining way because I'm not, I just don't feel that this additional work is providing any fruit for the creditors. Making things difficult for a Chapter 7 debtor does not really translate into increased revenues for creditors. Nor does making things difficult on debtors translate into the public believing that a Chapter 7 is out of reach. When a person has found themselves in an overwhelming debt, he is going to do whatever he needs to do under the bankruptcy code to get a fresh start. When a person has in excess of $50,000 in credit card debt, that person will submit as many as 10 credit counseling sessions, if need be. That person will go back and hunt down four years of tax returns. That person will go to his employer and say look, I need a printout of my most recent 60 days of paycheck stubs. It really doesn't matter how stringent or strict the requirements are, the debtor who has found himself in massive debt and who cannot pay and cannot live his life without the threat from creditors will do just about anything to get his financial life back in order.

If the creditors are really interested in stopping the number of bankruptcy filings in the United States, they need to start looking within. If credit card companies performed the same underwriting standards that mortgage companies typically do, 90% of the people who currently have credit cards wouldn't have them. But in reality, that's not the goal of the credit card industry. The industry is simply playing the profit percentage. What I mean by that is this. For every person who files a bankruptcy and discharges credit card debt, there are thousands who do not. And among those thousands who do not, there are hundreds who are paying high interest rates on their purchases and services. Thus, there is no reason for the credit card industry to do a thorough screening before issuing credit. The statistics will bear out that they are better off doing mass mailings and mass lending to be more profitable. I'm sure you have experienced as I have, a massive inflow of credit card applications over the years. One company in particular comes to mind. I have received in the last 10 years, no less than 100 advertisements from capital one. This company cannot get my business. I have nothing against the company, I just simply am okay with the credit cards that I have right now and capital one is not part of the program. The act of Capital one sending me 100 solicitations over the past 10 years will wind up fruitless. But for those who are seeking additional credit card debt, that application is an irresistible offer for more credit.

Although you may hear credit card companies complaining about the current bankruptcy situation, don't shed a single tear for them; for they are their own worst enemy, or this case, their own best friend. The credit card companies profits are increasing, the number of bankruptcies filed under Chapter 7 are significantly lower than they were in the last five years, and the US trustee’s office is diligently working to enforce the terms of the new bankruptcy law. The way I see it, the credit card industry has it pretty good right now. One important reminder though, and this we have learned from the current sub-prime mortgage crisis. Overzealous lending or extensions of credit can and will eventually lead to incredible defaults. Those defaults can and will lead to bankruptcy filings. In other words, if the credit card industry continues to lend or extend credit to people who do not have the ability to pay, they will find themselves in a similar position as that of the sub-prime mortgage crisis.

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