Trustee blames multiple factors for multiple bankruptcies

September 18, 2010|By ARNOLD S. PLATOU

HAGERSTOWN -- Is it fair that people who have been bailed out of debt by the bankruptcy law get to be cleared of all of their debts again?

And again?

In five of 20 cases where the question was asked during a recent U.S. Bankruptcy Court hearing in Hagerstown, the debtor said he or she had gotten bankruptcy relief at least once before.

In one case, a woman had gotten it twice before.

"It used to be every six years you could file for bankruptcy. Now, it's eight," said Cheryl E. Rose, a U.S. Bankruptcy Court trustee in Maryland.

"So if you ask me, it's probably fair. And I would actually throw it back on creditors and mortgage companies," Rose said. "If they're not going to take proper checks on the people they lend to, then I don't think they can complain."


She said parents and schools also should bear part of the blame.

Schools should give all high school students a basic financial education, Rose said.

"Do they even know how to balance a checkbook? It doesn't teach them what credit cards are. Most people think it's easy money, unless parents teach them," she said.

Based on what she hears debtors talk about in bankruptcy court, Rose said, she doesn't think many adults understand such basics.

"I think it would be a wonderful thing if schools taught, 'What's a car loan?' 'What's interest?'" Rose said. "I think they should know. And believe me, they don't."

Rose, who's been a bankruptcy trustee since 1993, said she was in a hearing on a recent day and asked a man, "'Do you have a second mortgage?' And he answered, 'No.'"

"And then later, he said -- like it was something else -- 'Well, I have a line of credit.' They didn't realize that their line of credit, their loan, was secured by their house. They didn't know," Rose said.

Is there ever a point when people who repeatedly seek bankruptcy relief face criminal charges?

"This is how people are punished if you want to quote, unquote, use that word," Rose replied. "It's going to be on their credit report, in most cases, for 10 years.

"And we know in this world, you can't do much if it's on your credit report."

However, she said, it is possible -- and it does happen -- that a person's credit can be restored quickly if he or she can justify it to a lender.

If you lost your job and then got a new one, you could write a letter saying, "'Hey now, I'm back working and I'm good,'" Rose said. "So if a credit manager is so inclined, you can" get credit.

As to criminal punishment for bankruptcy, "the only criminal penalties is when you commit a bankruptcy crime," such as trying to hide a stash of money while you're asking for debt relief, she said.

Rose talked about why she was drawn to doing bankruptcy work.

The outcome of bankruptcy cases, as opposed to criminal or family law cases, helps at least one side, Rose said.

"You can feel like you're helping people. I believe in the system. I believe that bankruptcy should be in our system," she said. It should be an option, she said, although "it shouldn't be an easy out."

One case Rose has long remembered illustrates the need for having bankruptcy as an option, she said.

"A woman had $400,000 in medical debt for treatment for her twins, who had been born prematurely," she said. "But they died, and she was left with a horrendous amount of debt -- and that was like 20 years ago.

"It was just a sad, sad little case. The woman had no medical insurance.

"That's reflection on the fact we don't have medical insurance for everyone. So I think (the availability of) bankruptcy is probably necessary for everyone."

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