In my ongoing effort to bring the very best and most up-to-date advice to my Indiana bankruptcy clients, I read. I read a lot, and I read many different publications, everything from daily newspapers and news magazines, to bankruptcy publications, blogs, and websites.  I read publications friends share with me: Mensa magazine, AARP publications, financial planning and employee benefit white papers, tax newsletters - you name it.  What's funny is how all these different areas relate to each other, and how one can pick up useful tidbits of information in the most unexpected places.

Needless to say, any publication dealing with jobs is important to my work as a bankruptcy attorney.  That's because being able to keep - or to find - a well-paying job is crucial for folks trying to reduce a debt load.  I often stress the fact that job loss is one of the three leading causes of bankruptcy (see Super Rich Or Bankrupt - You Could Be Anybody).  Then, following a bankruptcy, clients who've filed Chapter 7 need to keep their bills paid and gain control over their finances, and the right job is an important key to their success.  Clients who were working at the time they filed a Chapter 13 bankruptcy have taken on a debt repayment plan under the supervision of the bankruptcy court, and they need cash flow in order to keep up with those repayments. You can readily see why I do a lot of reading about job opportunities and job markets.

Well, the other day, in a consumer newsletter called JobDigs, I found an article called "12 Tips About Life And Work".  This article, I could immediately see, was different from any of the others I'd read.  It contained no statistics about jobs.  It contained no dress-for-success-and-carry-a-leather-brief advice, no career tips at all, for that matter.  Instead, the writer, Sue Morem, was offering twelve tips about attitudes that she believes lead to success in the job market.  As I was reading through these tips, I couldn't help thinking that, not only should I share the article with all my bankruptcy clients, but that every single person who's ever been laid off could benefit from reading the 12 tips.  In fact, those of us who have jobs could stand to be reminded of the things Morem was saying.

She offers some practical advice: Be Prompt.  Be WIlling (show enthusiasm for the job). Be Still (work on listening skills).  Be Appropriate (in appearance and behavior). But the two tips that might have been written especially for my bankruptcy clients, and the ones I think we could all stand to be reminded of are these:
"Be Grateful.  No job is beneath you….any job that pays you for a legal activity is an honorable job, and it probably pays you more in a month than people in many parts of the world make in a year. "
"Be Down.  Let your mistakes get you down.  Then get back up.  It's important to take the time to grieve over - not gloss over - a mistake.  Then, move on and be stronger."

What this last tip says to me is, post bankruptcy, you may feel as if you're back to entry-level in life.  But, that's exactly what the bankruptcy safety net is designed to do - offer re-entry into the rest of your life! Be Grateful. Be Down. Now, because you've accomplished the hardest part, you can move on and Be Stronger.

Between the time I spend meeting with clients in one or another of my four Indiana bankruptcy law offices, the time I spend in bankruptcy court representing those clients, the time spent teaching courses on bankruptcy, and time it takes to post blogs five times each week, there isn't always time to respond to individual comments and questions posted to the blog.  So, what I'm going to try to do in this blog post is review some important points I made in two earlier blogs (Bankruptcy Comes In Cans and The Cannots In The Bankruptcy Can).  That should provide answers to five or six recent comments from online readers, all of which essentially relate to what can be accomplished by filing bankruptcy.

Before "taking it from the top", I hasten to remind readers that every situation is different.  Bankruptcy law itself has a lot of complexity and little nuances, so the list of "cans" is meant as an overview.  In legal matters, at least my firm belief is that there's simply no substitute for seeking expert legal advice, someone who knows "which buttons to push".

 In general, bankruptcy may make it possible to:

a) discharge most debts (meaning eliminate the legal obligation to pay at least some debts)
b) stop or defer foreclosure on a home (or at least buy time to renegotiate mortgage terms)
c) stop wage garnishment
d) stop creditor collection efforts
e) prevent utilities from being turned off (or get them turned back on)
f) prevent repossession of a car (or force the creditor to return one that's been repossessed)

That's the "bird's eye view" of the "cans" of bankruptcy.  There are "cannots" as well (again, there are many legal details), debts that cannot be discharged through bankruptcy.  Important general categories of "cannots" include

a) child support and alimony payments
b) student loans (in most cases)
c) criminal fines
d) some taxes
'
Overall, the idea behind the bankruptcy system is to provide "cans" for people at a time when life is looking like one big series of "can'ts".  The message the bankruptcy legal system is bringing to distressed debtors is "Yes, you CAN have a future!"

Twelve states have laws making it illegal to secretly record a phone conversation without both parties' permission; Indiana's not one of those.  In our state you're allowed to record a conversation as long as one party gives consent.  That one party could be you, if you believe a debt collector has violated the Fair Debt Collection Practices Act.  In order for you to gather evidence you can turn over to the Indiana Attorney General's office (see Creditors In Contempt Of Bankruptcy Court), you might find that a recording device comes in handy.  Some phones have a recording feature, but, lacking that, you might check the nearest Radio Shack or other electronics store.

It's natural for creditors to try to collect the money they're owed; it's obvious no business can survive very long without getting paid for its products or services.  The flip side of the situation, though, is that debtors need protection from extraordinary harassment and disturbance of their lives, and that's what the Fair Debt Collection Practices Act is all about.  Some of the no-no's enumerated in the FDCPA include creditors contacting a debtor several times in a single day in an effort to wear him/her down, calling earlier than 8 AM or later than 9PM (unless the debtor has asked to be called then), calling on a Sunday, or calling at work if the debtor has asked not to be contacted there.  Creditors may not talk to your friends, relatives, or neighbors in an attempt to embarrass you, and they are not allowed to threaten you with jail.  They can't send collection notices in envelopes that indicate they're coming from a collection agency, or envelopes that look like government or IRS correspondence.

Of course, as I stressed in Oh Yes, You Can Stop Being Harassed!, the moment you file bankruptcy in Indiana, an order goes out from the bankruptcy court to all your creditors, telling them to leave you alone.  Under the "automatic stay", almost all creditors can't call and can't send letters, because the whole concept behind the bankruptcy system is to buy time for honest debtors to restart their financial lives.  Meanwhile, up until the time bankruptcy is actually filed, the FDCPA steps in, parent-style, saying in firm tones to creditors, "Now, you children play nice - or else!"

I'm certainly no rabid rap fan, but I do like true life tales of success after bankruptcy, and rapper MC Hammer has a great life tale to tell.  (Hammer's actually a fellow blogger, and he posts stories and videos about his life in a blog, called "Look, Look, Look", which  is also the name of one of his recent albums.)  Hammer, born Stanley Kirk Butrell, was in his heyday as a recording artist during the late 80's and into the 1990's.  I learned that Hammer became a preacher in the late 90's, and that today he hosts a Christian TV show, occasionally performing at events or concerts.  Music fans are familiar with Hammer's Oaktown Records label and his signature line of Hammer Pants.  As for me, I know of MC Hammer two ways, and both connections are worth mentioning as an inspiration to clients facing bankruptcy or who are emerging from bankruptcy.

First, in l996, Hammer filed a gigantic bankruptcy case in California, owing more than $10 million to his creditors.  From what I understand, his rise to fame had been rapid, and his fall from fame even more so.  One commentator's remark that "MC Hammer spent most of the latter half of the 1990's as a punch line in the music business." tells a lot about the public embarrassment that the Grammy Award-winning artist suffered in the process of falling into the bankruptcy safety net.  But the day after he filed the petition, Hammer made a statement that I think all debtors can heed: "It's time to stop the bleeding and get on with my life," he told the Hollywood Reporter.  As a bankruptcy attorney in Indiana for two and a half decades, I couldn't have expressed it any better - in that one brief sentence, Hammer managed to capture exactly what the bankruptcy court system is designed to help people do - get on with their lives! (See Born-Again Businesses After Bankruptcy)

Mr.Hammer's certainly getting on with his. The second way I know him (as you almost certainly do as well), is as master pitchman on TV commercials.  All the big name companies have used him in their marketing campaigns - Pepsi, Kentucky Fried Chicken, Taco Bell, and, more recently Nationwide Insurance (where he made fun of his own fall from wealth and fame).  In fact, this commercial pitchman thing was groundbreaking; rappers hadn't done that before, and he was jeered as a "sell-out".  (Of course, those very rappers ended up appearing in commercials and marketing clothing after seeing how successful Hammer was!) This year I even caught Hammer's appearance on ESPN's Monday Night Football.  Talk about making a new start after emerging from bankruptcy!  MC Hammer, you're absolutely right when you sing U Can't Touch This!  

As an Indiana consumer bankruptcy specialist, I've been dealing with debt, twenty-plus years and tens of thousands of people worth of it.  So, when I saw Indianapolis Business Journal managing editor Greg Andrews' piece titled "Firms With Debt In Check Starting To Reap Rewards" (Oct. 6 issue), I spent some time reflecting on how his observations jibe with my own experiences working with individuals and small business owners on debt issues and bankruptcy.

"In times like these", explains Andrews (referring to businesses' managing their balance sheets), "doing it well is what separates the winners from the losers." He goes on to report on how different corporations are handling their affairs in this brutal credit environment.  "Many executives who thought their firms had ample financial breathing room now aren't so sure.  No doubt, some are tossing and turning at night."

That last remark exactly describes what I'm seeing among individuals and small business owners.  I wrote about the situation in Not Business As Usual When Bankruptcy Looms.  Despite the myths about bankruptcy being the result of irresponsible overspending, truth is, the majority of people who arrive (no doubt after many, many sleepless nights), at one of my bankruptcy law offices around central Indiana, thought they had ample breathing room.  Almost to a person, they'd made their mortgage payments, done some savings for retirement, tried to teach their kids about handling money - the usual.  They just didn't see the job layoff coming, or the impossibly high costs of the unexpected medical disaster that hit a family member, or the enormity of the credit crunch that came back to roost on the small business into which they'd poured so much effort.

These people can't reap the rewards of getting their debt in check, at least not right now.  Greg Andrews talks about the companies in the winners' column who have enough cash to survive and even to take advantage of buying opportunities.  Many of my clients need help getting their debt in check to they can be winners again, and the only way they can hope to do that is with the help of the bankruptcy court system safety net.  IBJ quotes financier Warren Buffett's speech at the Berkshire Hathaway annual meeting, saying "Companies that need to tap credit markets to keep themselves going are beholden to their lenders." 

So many individuals - hardworking people who functioned ably within the system and believed in it are learning that truth the hard way.  And that's where you'll find me, at the junction of debt and debt-in-check, helping those who aren't in the winners' column just now.  (But, - just you wait!)

People who visit bankruptcy law offices have piles of bills, and a big part of my work as an Indiana bankruptcy attorney involves going through those piles of paper with them.  I almost always find myself wishing we'd been doing that pile-sifting a lot earlier in the game, because almost always what I find is that folks who cannot pay all their bills tend to choose the wrong ones to pay first.  They either pay the smallest bills, the ones they can get completely off the pile, or, worse, the companies with the most aggressive collection policies.  Although the best-case scenario would be one where all debts get paid, there are certain bills that have more immediate and more serious consequences if they're not paid.

In the immediate-consequences category would go car payments, rent or mortgage, and phone bills; if you don't pay those pretty much on time, life as you know it can pretty much stop happening.  The serious-consequences pile of bills would include federal tax bills, student loans, and child support.  Initial consequences might include having your bank account or other assets taken, or your wages garnished.

All of this is serious stuff, and, let me tell you, it happens to serious, hardworking people who just don't think clearly when everything starts to go wrong for them.  That's why I keep writing about how important it is to get legal representation as early in the process as possible (see Before Bankruptcy, The Brain Isn't Interested In Reality).  My work as a bankruptcy attorney for example, 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 work out installment payments for taxes, and dealing with the student loan authorities.  Most of these things relate to bankruptcy, but are the kinds of debt that can't be discharged in bankruptcy.

"When things get tough", they say, "the tough get going".  But, when bills pile up fast and furious, it often takes professional legal advice for people to realize what direction they need to get going IN!

If you want to see the "face" of our economy this year, we're told, just look at the sag in cosmetic surgery.  Since medical costs are one of the leading causes of bankruptcy, I make a special effort to stay on top of news reports having to do with healthcare in our country, and especially here in Indiana.  A recent CNN online piece discussed a survey in which 53% of cosmetic surgeons reported business being down by as much as 30%.

It's understandable that in tough economic times, spending on luxury items and services is negatively impacted. That's even more the case when prices for essential items are rising (see Add Some Water To Your Soup). The CNN article brought out a nuance I hadn't considered, though.  With the job market being so competitive, older workers sometimes consider that appearance improvements are not a luxury, but a necessity, to help them appear to be "at the top of their game" when compared with younger job candidates or co-workers.   So, what has happened, according to some of the medical professionals interviewed by CNN, is that, while cosmetic surgeries are down, there has been an uptick in cheaper, less invasive options such as Botox injections and wrinkle filler.  "Instead of shelling out $7000 for a face lift, patients spend $1000 for less dramatic results," says Dr. Patrick McMenamin, president-elect of the American Academy of Cosmetic Surgery.

As a bankruptcy lawyer in Indiana for the past two and a half decades, I've helped many, many people gradually rebuild their financial lives after bankruptcy.  While these clients may not be in a position to afford even the less expensive forms of cosmetic treatment while they're working on rebuilding their financial lives, the principle outlined by Dr. McMenamin would be a very appropriate one for them to follow.  Rather than foregoing all discretionary spending (Spartan diets of all types are difficult to maintain over time), buying "cheaper and less invasive" would be a good standard to follow.

As I mentioned in Airlines, Air Purifiers, And Small Business Bankruptcy, my work as a bankruptcy attorney in Indiana over these more than twenty years in practice focuses on individuals and small business owners, not on the mega-corporations whose bankruptcies, mergers, and takeovers are the stuff of headlines. However, in order to offer the very best information and advice to my clients, I'm constantly combing the business news so as to better understand the job market, the economy, and the housing markets in the country and especially in the different parts of our state of Indiana.

After more than two decades of observing these things, through good times and bad, I'm come to realize that, no matter at what point in the economic cycle we find ourselves, there always seem to be winners along with losers.  Take now, for instance.  Obviously, things are difficult in our state, with job layoffs, high costs for food and gasoline, and record numbers of bankruptcies and foreclosures.  Yet, on one single page of the Indianapolis Star, I found three stories that serve as a perfect example of the fact that silver linings and cloud covers are combined, with hopeful news holding its own despite everything.

This was a week or two ago, and on the left side of the page I read a story about Columbus, Indiana - based Irwin Financial suffering in a big way because of the credit crunch.  After failing to unload $1 billion in home equity loans, then failing to gain help from other banks, Irwin was forced to issue new stock to raise money.  Timing was terrible, since Irwin's stock had already lost 50% of its value this year.

Right next to that story was a headline about the expansion of e-mail marketing firm Exact Target, with that company announcing that it's doubling its workforce and creating a $25 million technology center.  Then, again on the same page, I found a feature story about the Pull-A-Part auto salvage chain that is profiting from the fact that people are keeping their cars longer.

I'm not being a Pollyanna here.  As an attorney who every day helps people deal with the all-too-real and all-too-immediate issues of bankruptcy, I know only too well that the Exact Target technology-based workforce expansion won't happen in time to help some of my clients who were laid off from manufacturing jobs.  What I want to bring out, though, is there's always another part of the economic cycle ahead, always a good reason to do the difficult things now in order to be able to enjoy the better times that come later.

I can't even tell you how many stories I've heard about "wheels".  It makes me feel very sad when someone arrives at one of my Indiana bankruptcy law offices in desperation because the bus doesn't go anywhere near their job and their car was just repossessed. Their children have doctor's appointments they can't get to, and they don't live near a grocery or pharmacy.  Obviously, folks who've had a car repossessed have other debt problems, too, but having a repo person come on to your property and take your car seems like the ultimate indignity.

For my blog readers, here's the scoop on car repos… when a lender takes your car back, it'll get auctioned.  You're given notice of where and when, and you get a chance to buy the car back.  If you can't, though, the car will get sold to someone else, probably for less than you owe on the loan, especially when the costs of repossessing, storing, and selling it are added.  You'll still end up owing the deficiency (with interest accumulating, of course).

What other choices are there?  First, contacting the lender to try and lower the payments for as long as three months while you get back on your feet, or asking the lender to extend the term of the loan so payments will be lower than they've been.  Then, filing bankruptcy will put a stop to collection efforts (that's called the automatic stay - see Oh, Yes, You Can Stop Being Harassed!), giving you some time to work out a plan to possibly hold on to the car. In fact, if you file a Chapter 13 bankruptcy before the car is sold, the creditor will have to return the vehicle even if it's already been repossessed. (A Chapter 13 will allow you to pay for the car over as long a period as 60 months.  That, in most cases, will result in a lower interest rate.)  In any event, a big part of the work I end up doing with clients who come to me in time is helping them keep their cars, especially when that makes the difference between their being able to work or not.

The absolutely most important message I need to get across in this blog post is that you need to address the problem before a payment is missed, when you see things going downhill.  There will be a whole lot better chance that way of keeping you wheeling along.

Just two weeks ago, entrepreneur Chris Gardner was here in Indianapolis, sharing the podium with Tony Dungy and other inspiring presenters at the Exact Target Connections '08 email marketing conference.  And, while I was needed at my Indiana bankruptcy law offices and couldn't get away to hear him this time, as a bankruptcy lawyer in Indiana for so many years, I know Gardner's got the message every person who has ever faced bankruptcy needs to hear and take to heart.  In one of my earlier bankruptcy blogs, Talk About Success After Bankruptcy, I told the story of actor Will Smith who went from bankruptcy to global stardom.  Well, the character that Will Smith portrayed in "Pursuit of Happyness" is Chris Gardner.

A little quick background:  As a child and teenager. Gardner grew up with just about every negative influence life has to offer, including alcoholism domestic abuse, child abuse, and illiteracy.  The movie tells the story of how Gardner, a homeless man raising a toddler on his own, passed the stockbrokers' exam and became a trainee at Dean Witter Reynolds, going on to establish the Chicago brokerage firm of Gardner Rich & Co.. Now Chris is CEO of Christopher Gardner International Holdings, with offices in New York, Chicago, and San Francisco, and he's a noted philanthropist, speaker, and author.

Gardner's message is about overcoming obstacles and breaking cycles, and that's what makes it so very fitting for people making a fresh start after bankruptcy.  I often reflect that, when we face challenges, we can choose to take one of three paths: We can avoid the issue, we can throw blame around or get bogged down in self blame, or we can start focusing on the "OK, so now what?"  Over the past almost twenty-five years of helping literally tens of thousands of people through the challenges of bankruptcy and foreclosure, I've learned over and over again the lesson that Chris Gardner not only teaches, but personifies: No matter how difficult the situation, people can always change their lives. 

"Wouldn't a person be better off trying a credit counseling service first before consulting a bankruptcy attorney? I think, in my almost twenty-five years of working as a bankruptcy attorney in Indiana, this is the question I hear the most.  And, as I pointed out in my earlier blog, More About Looking In All The Wrong Places, I never take offense to the question.  First off, there's no such thing as the best course of action that holds true in all cases and for all people.  But, more important, I always remind myself that the person asking the question usually has only a very foggy concept of what credit counseling actually is.

What not-for-profit credit counseling agencies are supposed to offer is education - about good spending habits, about budgets, managing bill-paying, and so on.  Then, for a fee, many credit counseling agencies offer to negotiate with creditors (just as debt settlement companies do).  Recent probes found many of the agencies were tied closely to the for-profit creditors, and worked mostly for the good of the creditors rather than taking care of the debtors. Many asked consumers to remit the monthly payments to them, rather than to the creditors, and the agencies would take commissions "off the top".  But, even in cases where the credit counseling agency is doing its work in very legitimate fashion, a Chapter 13 bankruptcy might be a much better choice for individuals who have the ability to make regular repayments on their debts.

Here are some of the reasons I favor the Chapter 13 bankruptcy over having credit counseling agencies negotiate settlements with lenders:  First, and very important, even with the best credit counseling plan, the interest on the debt doesn't stop accumulating.  A Chapter 13 bankruptcy, on the other hand, allows an individual to pay the debt over a three to five year period with no additional interest accruing! That's huge.  Second, also very important, is that in a Chapter 13, the court deals with all the debts, making sure that no one creditor gets preferential treatment.  With a debt consolidation agency plan, no creditor has to negotiate at all - in fact, there are creditors who absolutely will not deal with credit counseling agencies.

Underlying all of my remarks is my firm belief that people who have serious debt problems need to know and to weigh all their options. And, like it or not, that includes legal options.  And, while you may see this as a bias in favor of my own profession, the fact is, only an attorney is qualified to discuss legal options. Even more powerful an argument, the bankruptcy court system can provide services that no debt consolidation company or credit counseling agency can ever provide - the court has the authority to prohibit creditors from attaching property, from foreclosing on a home, and can legally force creditors to accept partial payments of certain debts. 

In my earlier blog, When Is Chapter 13 The Best Bankruptcy Choice?, I explain that Chapter 13 bankruptcy law was created for people who are earning income and who, despite setbacks they may have suffered, have the means, along with the will, to make payments on their debts under the supervision and protection of the bankruptcy court.

Everyone knows it's a buyer's market in Indiana housing these days, but first-time home-buyers haven't been flocking to make their move.  Much of the reason for the stall has been the mortgage market - lenders are much stricter nowadays about who qualifies for mortgage money, requiring higher down payments and a more solid work and credit histories than might have been true just a couple of years ago.  A new tax credit, though, is helping get first-timers going. 

As an Indiana bankruptcy attorney for two and a half decades, I'm usually dealing with homes years after they were purchased, helping folks make difficult decisions about foreclosure.  As I brought out in my earlier blog, Can Bad Habits Lead To Bankruptcy?, most bankruptcies, despite the myths, are not caused by irresponsible spending, but by catastrophic events such as extended illness, job loss, and divorce.  The same thing is true of foreclosures.  Despite the press and the myths, most foreclosures are not the result of irresponsible lending practices or even of "buying too much house", but derive from the same often unforeseeable combination of negative life events.

One aspect of this new tax credit plan for first-time home buyers, an aspect of which I heartily approve, is that it helps individuals who have good credit and who have enough income to qualify, get into a house without , as Dave Caveness of Carpenter Realtors points out, "pushing lenders to make irresponsible mortgage lending decisions."  The second thing I like about the tax credit plan itself is that it's not a give-away, but an interest-free loan from the government to first-time home buyers.

The tax credit applies, by the way, only to homes purchased between April 9, 2008 and July 1, 2009, and it's worth 10% of the purchase price of the home, with a ceiling of $7500 per buyer.  The credit must be repaid over fifteen years.  If the home is sold before then, the loan comes due.  One "escape clause", though, is that the repayment is due only if there is sufficient capital gain from the sale of the home; otherwise, the loan's forgiven.

Some realtor friends see the plan working already, if only on a small scale, to create some activity in the housing market.  Needless to say, our local economy could use it.  Always on the alert for good news that can help my Indiana bankruptcy clients rebuild their financial lives, I'm hoping this, as the song goes, "could be the start of something big".

As a bankruptcy attorney in Indiana, I can't help but notice that, all too often, serving our country can lead to a fight for one's financial life back at home.  In Pentagon Sees Risk In Soldiers' Debts, I talked about a Pentagon report on the severe debt loads that actually prevent many soldiers from obtaining their security clearance to go overseas. In a later blog, I shared word of the Moneywise education program funded by the Foundation for Financial Planning especially for soldiers (see Moneywise Program Reaches Out To Military).  My work as a Board-certified consumer bankruptcy specialist, dealing with thousands of people each year, including some veterans, has convinced me how crucial it is for soldiers and guardsmen to avoid the traps of payday loans and car title loans that have gotten so many military families into spiraling debt.

I was very happy to find out about programs that our own Lilly Endowment here in Indianapolis put into place just a year ago to help returning Indiana veterans.  Several aspects of those program are especially relevant to my work as a financial counselor to debtors. First, grants of up to $10,000 are available to Indiana National Guard families who "have suffered significant financial hardship as a result of active duty service." Job retraining for veterans is offered through Crane Learning and Employment Center for Veterans in southwest Indiana, and a multi-million dollar grant was made to the Roudebush VA Medical Center to help pay for sophisticated medical and rehabilitation treatment for veterans. In addition to these benefits through the Lilly Endowment, the State of Indiana offers veterans' housing programs, property tax deductions, education and job placement benefits.  

Handling medical costs, finding well-paid employment, finding good housing, and managing debt repayment - these are issues for all individuals. All of these play a role in the rebuilding process after bankruptcy, and, when these needs are not satisfied, all are leading causes of bankruptcy.  Veterans often need - and deserve - extra assistance getting back on their financial feet.  I'm proud of the efforts being made in the state of Indiana to provide this special help to these special people who've served us so loyally.

All the studies confirm what I already knew from more than twenty years as an Indiana bankruptcy attorney: Most people who file bankruptcy have suffered an illness, a job loss, an accident, a divorce, or other catastrophic event, and what they generally aren't  is compulsive gamblers or shoppers running up frivolous debt.  There's been lots of press about job losses and foreclosures and how those relate to Indiana's rising number of bankruptcies. One aspect of the situation, though, that's not gotten nearly enough coverage is the tie-in between bankruptcy and identity theft.

Identity theft is the use of another person's information in some way involving fraud and deception.  Not only is this type of crime an increasing problem in and of itself, a significant number of identity theft cases relate to bankruptcy cases.  To understand this, it's important you know that laws about debt and bankruptcy apply to any debt, including debt incurred through theft of someone's identity.  At first blush, you might wonder why anyone would even want to steal the identity of a person who's filing bankruptcy - after all, their credit is no good!  So the second thing you need to understand is that in most cases bankruptcy actually improves one's credit, to the point that credit offers flood in, making the debtor an ideal target for identity theft!

Bankruptcy-related identity theft doesn't need to mean stealing a credit card or other ID and using that to open a telephone account, buy clothes, furniture, or gadgets, or, worse yet, drugs.  The Executive Office for U.S. Trustees in Washington, D.C. reports cases where people bought real estate using stolen identities, or transferred part ownership in property to a bankrupt person to stave off foreclosure - the different permutations seem endless.  The Executive Office handled one case where a five year old boy was served papers directing him to attend a creditors' meeting for his bankruptcy, and another where an employee obtained a professional license using someone else's identity and then later filed bankruptcy in the name of the identity theft victim!

Clearly, we all need to be vigilant about our information, being very cautious about giving out our Social Security numbers and carrying around credit cards, not to mention periodically checking credit reports.  When a bankruptcy proceeding is involved, there's all the greater need for a watchful eye.  In a worst-case scenario, discharges of debts that have been granted by the bankruptcy court can be revoked, and the burden of setting the record straight falls on the debtor.  This is just one more important reason to seek the advice of an experienced bankruptcy attorney.  The U.S. Trustee staff is not allowed to offer assistance to victims of identity theft.  When I work with bankruptcy clients, one aspect of my work is to gather and submit all the necessary legal documents in such a way that their information is protected.  This is crucial, since, as part of the process in a typical bankruptcy, the financial information filed with the court becomes a matter of public record (with the exception of the Social Security number).

The bankruptcy court system, as I emphasized in Getting On Track After - Or Before - Bankruptcy, serves as a safety net for individuals and business owners, enabling them to make a fresh start.  As I help my clients rebuild their finances after bankruptcy, "Look to the future and protect your identity" is definitely the motto we adopt.

As you might imagine, a very big item on the list of debts I help clients put together when I'm helping them prepare for the bankruptcy court process is "plastic", meaning past due and overextended credit cards and debit cards.  In fact, as I brought out in Will You Have Debit Or Credit With Your Meal?, with the fall in home prices combined with rising medical bills, food bills, and fuel prices, more and more people have gotten into financial trouble by using plastic to pay these everyday costs.  But if you thought the plastic problem was limited to the unemployed or lower income families and individuals, think again.  In many cases, the roots of the financial problems leading to my bankruptcy law offices trace all the way back to the college campus.

A survey by student lender companies shows the average college grad carries close to $3,000 in credit card debt, with one in four having more than $5,000 in debt.  This is in addition to student loans (remember, these young folks haven't, in many cases, even begun to work!). College administrators have started paying attention to the problem, and have countered by setting rules about the marketing of credit to students on campus.  So, the newest tactic has been for companies (Walmart and Bancorp, for example) to sell "prepaid debit cards" to students.  While a typical debit card links to a checking account, the prepaid cards don't.  However, these cards tend to have high fees and less protection against theft or loss than credit cards.  In addition, prepaid debit cards don't help students establish a credit history.

Don't get me wrong - I understand parents need to find convenient ways for their students to pay everyday expenses, and the students need to have practice handling money.  It goes without saying that the college-educated will have greater job opportunities than those students who enter the work force directly from high school.  It's just that, as I counsel folks in my bankruptcy law offices around the state, I see people struggling under massive debt burdens that literally go back decades. What makes things so much more difficult, as I explained in More Government Help With Student Loans, it's almost never the case for student loans to be dismissed by a bankruptcy court.

A college education can be a key to a successful career, providing opportunities to qualify for the newer, technology and life sciences kinds of jobs. But, seen from my vantage point as a bankruptcy attorney in Indiana for more than twenty years, parents and college officials need to make sure Managing Money 101 plays an important part in the education of our young people!

Author and speaker Amy Hirshberg Lederman researches guilt.  She defines guilt as "that feeling that haunts us when our ideal of who we should be or what we should do differs from the reality of who we really are." Conventional guilt, she explains, emerges from feelings of low self-esteem and negative self-worth.  Hirshling-Lederman found that most people suffer from two kinds of guilt, the "not enough" and the "too much" syndromes.

My interest in the subject (as the friend who mailed me a copy of the "Got Guilt?" article in the Chicago Jewish News knows) stems from my work, over the past twenty-plus years with Indiana bankruptcy clients.  Believe me, guilt is the big unspoken presence in the office when clients are sharing their situations with me. The problem is, as I help clients prepare for the bankruptcy court process, there's no time for guilt and blame. There's important work to be done and important decisions to be made.  Earlier, in Getting Healthy After Bankruptcy, I wrote about the need for clients to see past the stress and guilt and blame, because these things just get in the way of progressing towards the rebuilding process. 

That's why I found the Four Point Plan for change described in the article so relevant. Amy Hirshberg-Lederman writes, "Judaism has a Four Point Plan…I call it AARP for Ask, Answer, Regret, Prepare.  ASK yourself hard personal questions.  ANSWER those honestly.  REGRET what has happened (in many bankruptcy cases, it's not so much something the individual has done wrong, but circumstances outside the control of the client), and then PREPARE to make meaningful changes."

This is such appropriate advice for everyone undergoing financial difficulties - don't you agree?

A Wall Street powerhouse since 1850, Lehman Brothers has filed Chapter 11 bankruptcy.  A Chapter 11 bankruptcy allows a company to temporarily stop paying bills and yet stay in business under the supervision of the bankruptcy court.  This buys time for the creditors to organize a compromise plan so that the bankrupt company can make payments on the debt.

As a bankruptcy attorney in Indiana, I've dealt with tens of thousands of individuals, families, and small businesses.  While I'm not involved with giants like Lehman Bros., I take an interest in the workings of our federal bankruptcy law system and how it functions as a financial safety net.

Actually, there are many ties that Lehman Brothers has to business right here in Indiana.  Lehman helped finance Radio Company of America and Chrysler here, and, in more recent years, provided financial services to WellPoint.  In an even more direct tie-in, Lehman packaged and sold mortgages on homes in Indianapolis (many of them now in foreclosure).  In fact, it's precisely because borrowers in Indiana and other states stopped making loan payments that Lehman Bros. came up short on cash.

Back in March of this year, Bear Stearns was in financial trouble, and the federal government organized a bailout of that company.  Now, though, federal officials made a decision that it's no longer prudent for them to keep bailing out firms.  Unable to find either a buyer or a bailout, Lehman was forced to go the route of declaring bankruptcy.

As I pointed out in my earlier blog, Super Rich Or Bankrupt - You Could Be Anybody, it's rarely one factor that drives individuals to file bankruptcy, but rather a combination of pressures over long periods of time.  Pundits in the press are doing a lot of talking about the troubles some financial giants such as Lehman Bros. are having.  Individuals and small business clients are the people I'm seeing every day in my four bankruptcy law offices around the state.  Most of these  Indiana small clients can't use Chapter 11, but they can instead seek relief through either a Chapter 7 or a Chapter 13 bankruptcy process. If individuals can draw any lesson from the Lehman Brothers' story, it's to seek help and begin implementing a strategy at the first sign of distress.  

In these bankruptcy blogs, I've often written about credit card debts (see Will You Have Debit Or Credit With Your Meal?).  As credit card defaults rise, credit card companies have tried to maintain profits, often by increasing fees and penalties.  Regulators, in turn, have been penalizing credit card companies for unfair practices. The sharp rise in food prices, gasoline prices, and heating costs has had the effect of driving people to use credit cards as a last resort for paying everyday bills. In fact, as I go over credit card debts and budgets with clients preparing to file bankruptcy in Indiana, I see more and more of this.

Meanwhile, the credit card companies are taking two "tacks".  First, they're stepping up collection efforts.  People who are just a couple of days late in making their payment are starting to get phone calls.  But these collection calls are taking a more lenient approach is many cases, with the card companies offering compromise payment plans, working on the premise that getting partial payment is better than getting none. At the same time, banks are already under pressure because of defaults on mortgages, and so they are trying hard to shore up their balance sheets by doing a better job collecting on credit card loans. 

Big banks and credit card companies such as American Express, Washington Mutual, and Discover are creating websites to offer payment assistance to customers. But not all collection efforts are friendly and helpful.  Even as the number of defaults on credit card debt rises, the number of consumer complaints about collection tactics is rising as well, creating a vicious cycle of credit card companies putting the squeeze on debtors, and debtors complaining about strong-arm tactics used by credit card companies.

A piece on debts in the Indianapolis Star stresses something I've been saying for years: "Consumers will have an easier time if they contact creditor at the first sign of trouble." Having served as a consumer bankruptcy specialist for two and a half decades, I know how crucially important it is to seek help early on.  The earlier in the process I can meet with bankruptcy clients and we can start building a strategy to combat financial difficulties, the greater the number of options that clients will have to choose from.  In fact, seeking help early is the only way to escape the vicious cycle of the credit card crunch.

I learned something inspiring and yet humorous the other day…Apparently, the National Association of Chapter 13 Trustees, creators of the Academy For Consumer Bankruptcy Education, followed their own advice about saving money.  The organization's annual seminar in San Francisco focused on ways to educate consumers who have mortgage and auto financing issues.

Each day of the two-day conference started with a panel discussion, after which audience responses to each panelist's talk were recorded.  The room was too large to register response through hand-raising, and the conference organizers didn't want to spend money on expensive electronic mechanisms, so… they passed out kazoos.  If an attendee agreed with a panelist, he's just blow on his kazoo!  The second day, kazoos were replaced with police whistles.

The mission of the Academy is to raise awareness of Chapter 13 bankruptcy, especially as an option for homeowners who have fallen behind on their mortgage payments.  (In my earlier bankruptcy blog, Some Hopeful News For This  Bloomington Bankruptcy Attorney, I explained that Chapter 13 involves a three to five year repayment plan.)  The Academy aims to educate the public, along with non-bankruptcy lawyers, about Chapter 13 bankruptcy plans and foreclosures.

As a bankruptcy attorney in Indiana for close to a quarter century, I applaud not only the effort to apply Chapter 13 bankruptcy solutions where that is appropriate.  On the other hand, I believe that clients would be best served by seeking out an attorney that is certified as a bankruptcy specialist rather than just a general practitioner (See Bankruptcy Attorney Certification: Not Just Paper On the Wall.)  As far as setting an example for wise use of money, I salute the National Association of Chapter 13 Trustees - a hearfelt "ka-zoo" to you!

As "The Bankruptcy Handbook" reminds taxpayers, getting on the wrong side of Uncle Sam by ignoring his notices is dangerous. Not only will that make government debt collectors angry, the amount of the outstanding tax debt will increase due to interest and penalties. On the other hand, as I explained in my earlier bankruptcy blog, Oh, Yes You Can Get Rid Of Back Taxes, the myth that you can never have tax bills discharged in bankruptcy is just that - a myth.  In fact, most income taxes more than three years old qualify for forgiveness under Indiana bankruptcy laws.  Too bad the two distraught taxpayers I read about didn't know that…

Just a couple of weeks ago in Birmingham, Alabama, a 48-year old taxpayer telephoned the IRS and made threats.  The IRS called the sheriff, who proceeded to the man's home, only to find him gone.  When the sheriff reached the man on his cell phone, he said he was on his way to drive his car off a cliff.  Instead, he drove to the IRS office and rammed his car into the building.  The taxpayer ended up in the hospital, with little to show for his efforts except for two broken windows in the building on which he'd taken out his frustrations.  Needless to say, the irate citizen still owes taxes, but now legal fees are added to his problems. 

The second taxpayer, this one an Iowa resident, claimed the IRS owed him a refund of all the income taxes he'd ever paid.  The Internal Revenue Service of the United States of America, he said, has no jurisdiction over him - he's a "citizen of heaven"! (In almost twenty five years of practicing bankruptcy law in Indiana, I sometimes think I've heard it all, but I confess I hadn't heard this one!). Now taxpayer #2 owes an additional; $250,000 fine.  (Needless to say, he's not getting the refund, from Heaven or from the IRS!)

These true stories are funny yet sad. Most important, they bring out how important it is for people behind on their taxes to work with an experienced consumer debt and bankruptcy professional, in order to make use of all the legal advantages available. There are three or four qualifications a taxpayer needs to meet in order to be excused from taxes under bankruptcy laws, and if those can be met, taxes are forgiven. Staying calm and visiting with an advisor doesn't make headlines, but it can sure save on hospital bills!