Clients who want the benefits of bankruptcy without any change or cost to the way they want to live life have been the theme of my practice lately.  This seems to come out when we do a Schedule J budget in a Chapter 13, and they want $300/month in recreation, $1400 in food, and $300 in clothing, figures that stand out in a bad way to a trustee.

A basic premise of Chapter 13 is that you must have money in excess of your on going living expenses to qualify.  Usually, these days, clients are in Chapter 13 because there’s something they must pay: mortgage arrears, priority taxes, or a car or two.  Yet these same debtors don’t see that a reasonable price to pay for time (to pay),  peace (from collectors), and discharge (of all the other debt) is a scaled down style of living.

While I try to explain that change is required, I hear the Victor Herbert song “I Want What I Want When I Want It” playing in my head.  I want to shake them and ask, “don’t you recognize what a marvelous opportunity to redeem your financial life this is?”

I haven’t started a list of the characteristics of clients with this attitude, but I’m going to.  To see it this often suggests either there’s  a client type that sees the world this way, or I’m missing something in my educational spiel.

My post on what to do when you can’t make your Chapter 13 payments on Bankruptcy Law Network, written for consumers,  sparked a couple of responses from my lawyer colleagues there.  Chip Parker observed he needed a refresher on how-to, since hardship discharges hadn’t been see much in the last decade in Florida.

Turns out my other bud, Kent Anderson, had written on the showing necessary for a hardship discharge for Lexis.

The exchange and cross pollination that is available to us as lawyers and consumers via the internet never ceases to energize me.

Be an educated client, but don’t tell me how to do the means test!  For someone who has spent as much time as I have trying to get good bankruptcy information out in the public domain, I found I had a very churlish reaction to a new client who wanted to tell me how his bonus would affect the means test.  What is there about law that makes everyone who is literate think he can read the law, and practice law?

The error this client was making was common:  he assumed that current monthly income was the magic number for an above median income debtor.  He missed the entire part of the “test” that looks at deductions from CMI to reach Monthly Disposable Income.  Who could tell whether the bonus made a difference on the bottom line without calculating the allowances and deductions?

Makes me ask myself, what is it that I want in a client?  How much knowledge should they have?  Do I really want to teach each client how the means test works, or doesn’t work, in order to file their case?  Do I truly prefer the passive, non thinking client?  This business of “medians” is more complex than it appears on its face.

My friend David Leibowitz explores the fears his clients have of bankruptcy on Bankruptcy Law Network.  I encounter clients with the same emotions, fear that life as they know it will end if they file bankruptcy.  Well, at some level, the miserable life of living in debt; sleepless nights;  having no financial  reserves will end.  But their fears are of something more horrible yet, bankruptcy.

Why aren’t they afraid of being penniless in their old age? This seems to me to be a real fear.  Almost every client who’s struggling to repay credit cards, now at 29% interest, is skimping on saving for retirement.  Courtesy of the Great Recession, they have no equity in their homes.  If they have a job, there’s no pension attached.  They have little or nothing set aside to augment Social Security.  Yet fear of bankruptcy keeps them paying on debt they can never repay.

My last post talked about the institutional purveyors of this fear.  I’m on this soapbox and don’t want to step down til I make some headway on this issue.

As one of the Peanuts characters said, “Arghhhhhhh!”

My colleagure at Bankruptcy Law Network Peter Orville wrote

It is natural to be afraid of doing something you’ve never done before, like filing for bankruptcy protection. This is especially true if you’ve heard stories about why you shouldn’t file bankruptcy

My beef is that the fear of bankruptcy is promoted by those with something to gain by demonizing bankruptcy. It’s the creditors, their cohorts the credit scoring folks, and the debt settlement companies who want you to think that filing bankruptcy is the end of life as we know it.  They all profit if consumers are scared off of filing bankruptcy.

My charge to my clients is that bankruptcy is not painful, or at least, any pain is self inflicted.  You can make yourself (or allow yourself) to feel as miserable and worthless as you choose to do so.  No one associated with the courts, including trustees, is judgmental.  A debtor does not have to justify his choice of bankruptcy relief and does not have to prove he is “worthy” of a discharge.  Eligibility for a discharge, even after bankruptcy reform, is presumed.

I have a perverse admiration for clients who have endured the pain and dispair of financial distress for as long as most of them have before seeking me out.  But life does not have to be that way;  bankruptcy is an honest and effective choice.   There is nothing to be afraid of.