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The Cram Down Myth

fairrington

*Disclaimer: nothing in this post should be construed as legal advice. If you think bankruptcy might be right for you, you should consult with an attorney. Your state bar association will be able to refer you to an attorney licensed to practice law in your state.

“How did you go bankrupt?” Bill asked.
“Two ways,” Mike said. “Gradually and then suddenly.”
Ernest Hemingway, The Sun Also Rises

The image of the irresponsible debtor dripping in diamonds, driving around in a flashy car and burning money while nonchalantly filing bankruptcy is a stereotype created by the credit card and banking industries to guilt middle class Americans into thinking of bankruptcy as some shameful act to be avoided on pain of death instead of what it is: a financial planning tool. The vast majority of people who file bankruptcy are honest, hard-working people who paid their bills on time and never dreamed of filing bankruptcy until . . . until that devastating illness kept them out of work for 6 months, until the insurance coverage turned out to be inadequate, until the divorce, until the factory closed, until, until, until. No one is immune.

The law recognizes that sometimes unforeseen, uncontrollable events can lead a consumer to accumulate unmanageable debt that can ruin their lives. For this reason, the Bankruptcy Code was written: to provide the honest but unfortunate debtor with a fresh start. Yet, every single person who walks through my door for a consultation ends up crying in my office. They have spent months without sleep stressing out about how in the world they will ever pay down their overwhelming, soul-crushing debt. Often they have been working two jobs trying to make ends meet. They have been robbing Peter to pay Paul in the hope that something will turn up to enable them to catch up on their bills. I am their last resort and they know it, or they would not have come to see me.

And still they do not want to file bankruptcy. Still they hope against hope that I will be able to tell them that that there is something (anything! can I sell my kidney?) else they can do other than filing bankruptcy. Anyone who expects me to tell the 60 year old hair dresser with no insurance and $100,000 in medical bills from her double-mastectomy who walked into my office a year ago to work until she is 90 and go without “luxuries” (like food) so that she can pay that debt because it is the “responsible” thing to do can just stop reading now. And I suggest you avoid my future posts as well. Continue reading