Bankruptcy bill’s effects eyed locally |

Bankruptcy bill’s effects eyed locally

Alex Miller

EAGLE COUNTY – A bankruptcy bill that cleared the U.S. Senate in early March by a vote of 74-25 is being cheered by big business while its effects on people locally have yet to be assessed. It goes before the House next month, and President Bush said he will sign it into law if it reaches his desk. The proposed changes in the bankruptcy law would make it more difficult for those filing to walk away from their debts completely. Filers would be required to go through a more rigorous process, including credit counseling, and the threshold for dissolving credit card and other consumer debts would be raised.According to the Eagle County Treasurer’s Office, only 17 bankruptcies were processed in 2004, although that was up from eight in 2003. Attorney John Goodman of Goodman & Wallace in Edwards said bankruptcy filings are only a small part of his practice.”Typically what we find is people are filing (bankruptcy) because of some kind of catastrophic loss,” Goodman said, mentioning things like job loss, an unpredicted medical event or other personal issue.Frivolous spendersWhile the bill being debated in Washington is described by its backers as addressing the problem of irresponsible spending and the ensuing abdication of debts through bankruptcy, Goodman said that’s not the kind of thing he sees at his office.”The changes that are occurring (with the bill) are aimed at what I call the ‘big hat, no cattle’ folks,” he said, “the kind of people buying plasma TVs on credit cards who can’t afford it. We don’t typically see that kind of abusive conduct.”Instead, Goodman said, the people he helps are the ones who have incurred large credit card debt because of a crisis of some sort. Oftentimes, it’s a medical issue faced by people with poor or no health insurance.”Say a newborn needs be airlifted to Denver for urgent care,” he said. “While the parents would grateful for the care, if they are of limited financial means or not adequately insured, they could be faced with the daunting task of trying to pay for these services.”Opponents of the proposed new law say it doesn’t contain enough protections for people in such situations, removing a societal safety net that may, in turn, create a nation of creditors forever indebted to credit card companies.”The concerns and interest of consumers, poor and middle-class families , our uniformed service members and their families, and veterans were cast callously aside,” said Sen. Patrick Leahy, D-Vt.For his part, Goodman said by the time the bill becomes law, it will likely look different from its current form. It’s his take that it’s mostly the frivolous spenders who will be most adversely affected.Avoiding bankruptcyWhile some news accounts have described a rush to bankruptcy lawyers by those wishing to file under the current laws, Goodman said he hasn’t seen that locally. Arriving at the decision to file for bankruptcy, he said, is a long and agonizing process for most people, and it can take months. He suggests it only be used as a last resort, regardless of the law.”We will work with people, look at the financial picture,” he said. “The bottom line is income over expenses, so we try to see if people can free up some cash to pay down debt. But if they’ve tried everything, have no assets or someone they can borrow from, then they may be a candidate for bankruptcy.”Those not ready to take the Chapter 7 or 13 plunge may seek professional credit counseling.Catherine Williams, whose title at Money Management International is vice president of financial literacy, says only about 6 percent of the clients who contact the credit counseling agency for help truly qualify for bankruptcy. About 25 percent, she said, simply need some “good, tough budgeting,” while others go into a repayment program.”That’s where we negotiate a repayment plan with the creditors,” Williams said. “We’ll bargain for lower monthly payments and also get concessions on interest and fees.”Going that route, Williams said, can save debtors a great deal of money over what they’d pay on their own, meting out minimum monthly payments to half a dozen banks for the rest of their lives. ‘A humbling event’Money Management International, which is in the Vail phone book as “Consumer Credit Counseling Services,” is a nonprofit corporation that nonetheless receives most of its funding from the credit industry. It is the kind of company that stands to benefit by the proposed bankruptcy law, since court-ordered counseling is one of the bill’s provisions. Williams also points out that credit counseling agencies will need to be given a “seal of approval” by the courts, which may lead to better regulation of an industry that has its fair share of shady practitioners.”When you’re picking a credit counselor, you have to put your consumer hat on,” Williams said. “Ask if they’re licensed to do business in your state, if the counselors are certified in any way. And ask exactly what kind of services they’re going to give.”Another good idea is to check with the Better Business Bureau or other online business-reporting agencies to see if a company has any complaints or legal actions pending against it. (Money Management International had a clean record from the Better Business Bureau.) For those still looking at the bankruptcy option, the current law will probably stand until fall, when the new rules are expected to take effect. It’s not pleasant, but it’s not the end of the world either, Goodman said.”You live through it, but it’s a very humbling event for a lot of people,” he said. The Associated Press contributed to this story.Vail, Colorado

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