The number of bankruptcies in Indiana has risen dramatically, and I was one of two attorneys interviewed for the report “Indiana Bankruptcies Soar” in the December 1-7 issue of the Indianapolis Business Journal. As I explained in my earlier blog Super Rich Or Bankrupt – You Could Be Anybody, the three traditional causes of bankruptcy in Indiana have been divorce, medical bills, and job loss. The myth about bankruptcy is that it happens to people who lived beyond their means. I wanted to emphasize that quite often, I see families who were very careful with their money, and who were hit with tremendous medical costs, perhaps in combination with a job loss that meant losing their health coverage.
I went on to say that the person filing bankruptcy might be a hardworking entrepreneur whose small business just couldn’t withstand all the negative forces in our economy right now. A business might also have suffered damage from a fire or a flood, or that business might not have been able to afford to defend itself against a frivolous lawsuit.
In talking with the IBJ, however, I added that recently I’ve observed a glut of bankruptcies from people related to the real estate industry, including mortgage brokers, agents, roofers, framers, and carpet installers. Most of the time, I explained, the equity in these people’s homes has been used up long ago, so they have no resources left to cover their bills. Their customers are in the same boat – there’s no home equity to tap for remodeling and redecorating, so, as I brought out, “the painters aren’t painting”.
The IBJ article mentioned the fact that, in 2005, bankruptcy laws became more restrictive. These changes were so well publicized that, as Henry Sommer, president of the National Association of Consumer Bankruptcy Attorneys, remarked, many people assume they can’t resort to bankruptcy. To me, this is another of those persistent myths that circulates, preventing some people who really need to explore the option of filing bankruptcy from seeking professional help.
My work as a bankruptcy attorney includes keeping cars from getting repossessed before it’s too late, helping negotiate with mortgage lenders to stave off foreclosure, working with the IRS to arrange installment payments on taxes, and dealing with student loan authorities. These are things related to bankruptcy, but which can’t be discharged in bankruptcy. My message is a simple one – please, please don’t assume the new laws will preclude your getting relief. And, please, please seek legal help at the first signs of financial trouble.