A 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%).

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David M. Siegel is the author of Chapter 7 Success: The
Complete Guide to Surviving Personal Bankruptcy. He is a
member of the American Bankruptcy Institute and currently
practices bankruptcy law in Chicago and its surrounding
suburbs. Additional information is available at
http://www.chapter7success.com .