Alternatives to Bankruptcy

27 Jul Alternatives to Bankruptcy

Clients invariably ask, “Should I file bankruptcy?” Though it might be less than polite, I want to ask them, “What do you propose to do if you don’t file bankruptcy”.

Most Americans want desperately not to file bankruptcy but the simple arithmetic of their income, their assets, and their debts dictate that they cannot realistically pay off what they owe. They certainly can’t save for emergencies or retirement while repaying credit card debt at 18-35%.

Which is what made Professor Todd Zywicki’s recent testimony before the House Judiciary Committee so infuriating. The committee was considering the intersection between the cost of medical care and bankruptcy. Here’s what he said:

Every $100,000 discharged rather than paid in bankruptcy may be the difference between a hospital hiring a new nurse or the ability of a doctor to afford indigent care for another patient.

The good professor makes the same erroneous assumption my clients do: that the debtor has the ability to pay the debt.

It’s not that the debtor has Prof. Z’s $1000 with which he could pay the hospital for its service if he would only choose to pay instead of chosing bankruptcy. The debtor doesn’t have, and is unlikely ever to have, enough to pay the debt.

So, let’s stop pretending, individually and collectively, that debtors have meaningful choices about whether they file bankruptcy or not. By the time they are willing to entertain the thought of filing, they are already in too deep for anything else.

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Cathy Moran, Esq.

I'm a certified specialist in bankruptcy law (California State Bar Board of Legal Specialization) practicing in the San Francisco Bay Area for more than 30 years. In addition to practicing bankruptcy law, I train new practitioners at Bankruptcy Mastery.
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