Why People File for Bankruptcy (Part 1)

by Brett Weiss, Esq.

August 17, 2007

There is a common misconception in the general community that people who file for bankruptcy are deadbeats, responsible (if not the cause) of their financial misfortune. “They should plan better,” or “They should live within their means,” or “Why don’t they just pay their bills like the rest of us” are some of the disparaging comments I’ve heard.

While everyone agrees that planning, living within one’s means, and paying bills are good things, sometimes bad things happen to good people, and despite proper planning, frugal money management, and a strong desire to pay your bills, you just can’t.

What happened to Kathleen Aldrich is a good example.

An article on MSNBC talks about Ms. Aldrich, who did everything right, and still ended up filing for Chapter 7 bankruptcy. She raised three kids as a single mom. She worked hard for years. She had good jobs. She paid her bills. She lived in a nice house and drove a nice car. She had a decent credit rating. She had health insurance. But two bouts with ovarian cancer left her with no choice but to file for bankruptcy.

Dr. Deborah Thorne of Ohio University. the co-author of a widely quoted 2005 study that found medical bills contributed to nearly half of the 1.5 million personal bankruptcies filed in the U.S. each year, said that Aldrich’s situation is “asinine” but increasingly common. In fact, it’s gotten even worse in the past two years.

Bankruptcy in the light of large medical bills is “unfortunately the only choice many people have,” she said. “They will never in their lifetimes pay them off.

“To talk with these people again and again is so frustrating. They’re such thoughtful, kind folks who are being set up by the system we have now. What’s most appalling is they’re ashamed.”

Like Aldrich, Thorne said, three-quarters of the individuals in the study who declared bankruptcy because of health problems were insured.

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Brett Weiss, a senior partner at Chung & Press, LLC, represents people and businesses in all phases of bankruptcy. He has experience in complex individual Chapter 7, Chapter 11 and Chapter 13 bankruptcy cases, and in Chapter 11 small business restructuring and reorganization. Mr. Weiss lectures nationally on bankruptcy issues. He has testified before the Federal Bankruptcy Rules Committee, the Consumer Financial Protection Bureau, and has twice testified before Congress on bankruptcy and credit issues. Brett Weiss is the co-author of Chapter 11 for Individual Debtors, and has written Not Dead Yet: Bankruptcy After BAPCPA, for the Maryland Bar Journal, as well as hundreds of blogs for the Bankruptcy Law Network. With his law partner, he recorded a 13-hour basic bankruptcy training series, and leads intensive three-day Chapter 11 training boot camps. Mr. Weiss has received international media attention in connection with his work. He was interviewed by Barbara Walters on The View, has appeared on the Today Show, Good Morning America, ABC News with Peter Jennings, the Montel Williams Show, National Public Radio, AARP-TV, the BBC World Service, German state television, and numerous local radio and television programs, and been quoted in Money magazine, The Washington Post and The Baltimore Sun, among others. Brett Weiss is the Maryland State Chair for the National Association of Consumer Bankruptcy Attorneys, a founding member of the Bankruptcy Law Network, on the board of the Maryland State Bar Consumer Bankruptcy Council, and a member of the American Bankruptcy Institute, the Bankruptcy Bar Association of Maryland, and the Civil Justice Network. He has been recognized as a “Super Lawyer” every year since 2007 for Maryland and the District of Columbia, and in 2011 received the Distinguished Service Award from the National Association of Consumer Bankruptcy Attorneys for his work on behalf of consumers across the country. Mr. Weiss is admitted to practice before Maryland and District of Columbia federal and state courts, the United States Courts of Appeals for the DC, Fourth and Eighth Circuits, The United States Tax Court, and the Supreme Court of the United States, and has been practicing law since 1983.

Last modified: August 17, 2007