06 Apr A Bankruptcy Attorney’s Story: Catching Those Who Are Falling
For many years bankruptcy was seen as something that was used by either businessmen like Donald Trump or by people who didn’t have much income. This is no longer true as people in lower, middle, and the upper class are turning to bankruptcy lawyers for help.
My friend, colleague, and sometimes adversary, Rick Mitchell was featured in today’s Charlotte Observer newspaper. Like me, Mitchell is a Charlotte NC bankruptcy attorney, and he is also a Chapter 7 Trustee. The story pointed to what I have also been seeing in my practice over the last year – there is an increase in bankruptcy being sought by middle and upper class people, as well as business owners.
Many have been hurt by the mortgage crisis, and businesses are affected by tightened spending by everyone trying to make ends meet in a world of job loss and climbing food and gas prices. Rich and poor alike are facing financial problems these days.
Read the full story below:
COPING IN THE DOWNTURN | PART OF AN OCCASIONAL SERIES
Catching those who are falling
Bankruptcy attorney stumbled into career; now, he helps others get back on their feet
TODD SUMLIN / Staff Photographer
Bankruptcy attorney Rick Mitchell
Imagine you’re part of an all-American family, with a house, two cars and a couple of kids.
Now, imagine you have $50,000 in credit card debt.
That’s increasingly common for those seeking help from Rick Mitchell. Mitchell, 67, is a longtime Charlotte bankruptcy attorney who represents those who owe and are owed.
As the economy sours, attorneys and experts say the look of the typical bankruptcy client is changing. Almost solely sick, divorced or unemployed in years past, today’s clients are also middle- or upper-class homeowners and business owners burdened with credit card debt they can’t shake or a home they can’t sell.
The numbers of them are rising, too.
There were 376 personal bankruptcy filings in Charlotte in the first three months of this year, up 12 percent from the same period last year, bankruptcy officials say.
In 2007, there were 2,556 total bankruptcy cases filed in Charlotte, compared with 2,263 the year before — a 13 percent rise. Working with the people who come through Mitchell’s door is both satisfying and saddening for the attorney. He feels for the churches who can’t pay their bills and the college grads just starting out on their own and already buried under credit card debt.
While he acknowledges filing for bankruptcy protection can stain a credit record for years, Mitchell says it can be the right option for people in desperate circumstances.
People deserve to have their debts swept away, like chalk from a blackboard, simply by asking, he says.
“When I get a card at Christmastime from a person that says, `Thank you so much; you’ve really turned my life around,’ that just makes you feel damn good,” Mitchell says.
A widespread problem
On a warm March morning, the bankruptcy administrator’s office is busy, full of attorneys joking like old friends and clients sitting in silent rows behind them.There’s a middle-aged woman, prim and well dressed, carrying a designer handbag. An older couple in jeans. A young man and woman with a chubby-cheeked baby who is chewing on a purple blanket, curiously watching his parents as the bankruptcy hearings unfold.
It’s a place Mitchell never thought he’d be when he started his law career here 36 years ago.
Mitchell practiced criminal law but says he couldn’t stand his clients. He was appointed a trustee in a bankruptcy case three years later and took to it, largely because he identified with his clients more.
Today, Mitchell spends many days in his office, a sunny space on Morehead Street with wide windows overlooking the light-rail tracks and The Arlington building’s pink-mirrored walls.
Among the law books are photos of Mitchell and his wife, Cindy Martin, posing in puffy ski jackets on snowy hillsides, smiling from a dinner table in Italy.
Mitchell says he’s especially moved by the men and women in their 70s and 80s who lived through the Depression and can’t bear to miss a payment.
He recalls an elderly woman who insisted on paying her debts until Mitchell sat down with her and worked out a budget, showing the woman that she would have to choose between her bills and buying food.
“It’s an ego-deflating thing for them,” he says. “That really bothers me. And believe it or not, it happens a lot.”
Each week, Mitchell meets five to 10 new clients and heads to hearings three times.
All the while, he’s kept busy with a mounting number of bankruptcy cases.
“People are hurting,” Mitchell says. “Look at what folks are paying for gas.”
His clients include homebuilders who can’t sell their products because of the mortgage crisis and transplants who can’t sell their homes in other states because of the slumping economy, he says.
Bankruptcy is a good option for people who can’t repay their debts or afford their mortgages, but it does have a considerable downside, said Doug Hammond of Alliance Credit Counseling in Ballantyne.
A bankruptcy can stay on a person’s file for seven to 10 years and negatively affect credit — though most people thinking about filing have poor credit anyway, he said.
Bankruptcy “is not just a low-income problem,” Hammond said. “It’s definitely more widespread. There are a lot more homeowners than ever before who are robbing Peter to pay Paul.”
Mitchell agrees that filing for bankruptcy should be a last resort in many cases.
He recalls clients who made a good living and ran a successful business but couldn’t get a home loan after they filed for bankruptcy protection, even with a 50 percent down payment. Eventually, the couple had to pay cash for the house.
Getting a car or credit card is easier, Mitchell says. Most who file for bankruptcy protection will be able to buy a car once their debts are discharged, and a few months after that, they’ll start receiving preapproved credit card applications, he says.
Still, the credit limits will be low, and the interest rates will be high.
“Many people are credit-worthy, based on their income, but the worse your credit history is, the more interest you’ll pay,” he says.
His colleagues say they respect him for his integrity, common sense and a deep knowledge of the law — after a few good-natured jokes about Mitchell’s crotchety demeanor.
“He expects his clients to hold up their end of the bargain,” said his law partner, Heather Culp. “I think people have a healthy respect for him. Their first impression is, he’s one tough guy, but if they’re honest and do their part, he’ll go to bat for them.”
Back in his office, as the late-afternoon sun sinks behind The Arlington’s pink mirrors, Mitchell is finishing an imaginary pitch to the all-American family.
I know how you feel, he says, the yellow-orange rays glinting in his glasses like fire. It’s like you have to cross this little stream to get to the fresh start, but there are trolls under the bridge.
“You know where trolls live?” He points to his head. “And when you tell those trolls to be gone, they’ll be gone.”
Gone, like chalk from a blackboard.
Coping in the downturn | part of an occasional series
Job: Lawyer, Mitchell & Culp
Hometown: Richmond, Va.
Education: UNC Charlotte, bachelor’s degree; UNC Chapel Hill, law degree.
Family: Wife, Cindy Martin; grown daughter.
Memorable legal accomplishment: “Winning my first jury trial three months out of law school,” he says. “Did I know what I was doing? Hell, no. But it was good enough to win.”
Avoid filing for bankruptcy protection
Tips from bankruptcy attorney Rick Mitchell and credit counselors:
- Think about ways to protect your money. Hint: “Putting your money in a jar in the back yard is not one of them,” Mitchell says.
- Avoid credit card debt; it’s the most expensive kind to get rid of. Pay off credit cards each month.
- Live within your means. Don’t buy a house or car you can’t afford. If you lose your job or get sick, you’ll be out of luck.
- Start a savings account or cash reserve fund of at least three months’ income in case you lose your job or have some other emergency.
- Put yourself on a budget and stick to it.
- Pay off debts in a timely manner.
- Think about the future. If you’re in your 20s and have years to pay off your debt, you might not need to file for bankruptcy protection. If you’re nearing retirement and don’t want to sacrifice your retirement accounts trying to pay off your debt, you might consider it.
- In general, when you get to the point where you ask, “Can I reasonably pay this back?” and the answer is “no,” consider filing for bankruptcy protection.
When you file
Most Chapter 7 personal bankruptcy cases go like this:
- You meet with your attorney to discuss your needs and your options. For most simple bankruptcy cases, attorney fees start around $1,200, credit counselors say. That number can be higher for larger, more complicated cases.
- You’ll have to take a credit counseling course (and later, a financial management course) and meet with your attorney’s legal assistant to fill out paperwork. The assistant sends your information to the bankruptcy court.
- At that point, you have a fresh start.
- Attend an initial hearing about a month after filing, which is presided over by a trustee and held in the bankruptcy administrator’s office. You could be there 15 minutes or an hour. Bring something to read.
- After that hearing, your active involvement is done.
- About two months later, your discharge order is filed. That means most of your debts are gone and can never come back. If your creditors try to collect money from you for old debts, they can be fined.
- Some debts hang around after the fresh start, including alimony and child support, school loans and debts incurred through fraud or wrongdoing.
- If you get a phone call from creditors after you’ve filed, say you have filed a Chapter 7 bankruptcy, give the name of your lawyer. Throw away letters you receive for the first 90 days; after that, give them to your lawyer.
- After your fresh start, you have the same rights as anyone. You can buy property, start a business, win the lottery or get credit, though that might take a while longer now.
- Your credit report can show your bankruptcy filing for up to 10 years. This could make it harder to buy a home, and it will mean higher interest rates on cars and credit cards and lower credit limits.
Kirsten Valle: 704-358-5248
Read the Charlotte Observer’s special series Coping With An Economic Downturn
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