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THE LURE OF EASY BANKRUPTCY and *Here is a true story about bankruptcy, and the advantages it offers. A *husband and wife team of practicing psychiatrists, with a joint income of *$78,000 per annum, accumulate personal debts totaling $22,000, and also have *outstanding a $33,000 mortgage on their com-fortable suburban New York home. *They are not in arears, nor even over their heads. They simply seek more *discretionary spending power. and *Their solution to the problem? They file for bankruptcy and are able to *immediately reduce their debt load to a mere 10 cents on the dollar, *repayable on an extended schedule in very small amounts. An officer in one *of their finance companies notes that they could refinance the mortgage or *even sell the house. But you will see in a moment why that was not *necessary. and *Traditionally, personal bankruptcy has been a desperate last resort for *those so deeply in debt and harried by creditors, that there really seemed *to be no other solution. The typical profile included low-income, under- *educated clerical workers or laborers, or perhaps transient non-homeowners. *Common age groups were those who were in their twenties, or those over sixty *five years of age. and *This is no longer the case. Today's profile includes people with good jobs, *even families with two incomes. It is not surprising to find those with *six-figure incomes declaring bankruptcy. The process comes no longer out *of a dire necessity, but it is now a means by which people can rid themselves *of debts that cramp their lifestyle. and *The most common applicants for bankruptcy include recent college graduates *who file in order to avoid paying back government-guaran-teed student loans. *Their rationale? They feel society owed them an education. and *You will also find older, "keep up with the Joneses" types filing for *bankruptcy. For suburban executives to Wall Street professionals, they are *unwilling to live within their means. and *The passage of the Federal Bankruptcy Act of 1978 made the whole process *much easier. This change significantly liberalized personal filing *procedures in the name of consumer rights. and *Chapter 7 makes no reference at all to the debtor's income. It permits *debtors to clear the slate by turning over all their assets except those *specifically exempted to creditors. Among the exemptions: Up to $7,500.00 *equity in the debtor's house (15,000 if both file); $4,000.00 in accrued *dividends; $1,200.00 in automobile equity; $500.00 in jewelry; $200 per *category of household items (including clothing, books, etc.) and more! and *Chapter 13 requires that debtors show only a regular income to handle a *reasonable three-year pay-back plan. The court's definition of reasonable *happens to be as little as 1% to 10%, even when a payment of 50% could *easily be managed. and and |
