In a recent episode of his popular talk show on HBO, comedian John Oliver took a deep dive into the personal bankruptcy system. He was not impressed by what he found.
Oliver used his trademark brand of hard truths and humor to report:
- Chapter 7 and Chapter 13, both ways of filing for personal bankruptcy, are very different from one another. Some people who should file for Chapter 7 are being steered toward Chapter 13, and they end up deeper in debt and worse off than they would have been had they done nothing to address their debts.
- African-Americans are disproportionately steered toward Chapter 13 when Chapter 7 would be more appropriate for them.
- Some of the organizations that offer mandatory credit counseling are focused more on helping filers check a box than offering meaningful counseling.
- There is still a stigma attached to filing for bankruptcy.
All of these things are unfortunately true. Let’s go through them one at a time.
Chapter 7 & Chapter 13 Are Very Different From One Another
There are two different chapters of the bankruptcy code that most personal bankruptcies are filed under — Chapter 7 and Chapter 13. Chapter 7 bankruptcies are traditional bankruptcies where all but a few assets are sold off, the proceeds of the sale are used to pay off creditors, and most remaining debts are forgiven. Chapter 13 is a court-supervised repayment plan. If you make all of your Chapter 13 payments during the 3-5 year period your plan is in place, most of your remaining debts are forgiven.
These two processes are very different. It is therefore important to work with an experienced bankruptcy attorney that can advise you which chapter would work better for you. As Oliver notes, too many people who might be better served by Chapter 7 are being steered toward Chapter 13. At Hanson & Payne, we always go through all of a client’s options, and never push them to do something that would not be in their best interest.
African-Americans Are Disproportionately Steered Toward Chapter 13
Oliver notes that a disproportionate number of the people who are steered toward Chapter 13, but should probably file under Chapter 7, are African-Americans. This is unacceptable.
The Hanson & Payne team is committed to providing all of our clients the legal counsel they deserve, regardless of the color of their skin. Milwaukee is a multicultural city, and we are proud to serve everyone who calls it home.
Mandatory Credit Counseling Falls Short Of Its Potential
Oliver notes that taking a credit counseling class is mandatory in the modern bankruptcy system. He then highlights some research indicating the classes are not always helpful.
Whether you just want to check the box saying you did the required counseling, or you want to do some hands-on work with an experienced financial advisor, the Hanson & Payne team can point you in the right direction. There are a number of approved credit counselors serving debtors in the Eastern District of Wisconsin.
The Stigma Of Bankruptcy
One of Oliver’s biggest complaints is that people who file for bankruptcy still face harsh public scrutiny. We can all work together to erase the stigma of bankruptcy.
Remember, filing for bankruptcy is not a moral failure. Bankruptcy is more often the result of bad luck than it is bad choices.
Experienced Bankruptcy Attorneys In The Milwaukee Area
Bankruptcy is a complex area of law. Filing for bankruptcy will have a huge impact on your life. Working with an experienced bankruptcy attorney, like those of us here at Hanson & Payne, can help ensure that your bankruptcy experience is as helpful and straightforward as you deserve it to be. If you are considering filing for personal bankruptcy, Hanson & Payne is here for you. Please contact our office to schedule an initial consultation.