Bill collectors are taking advantage of the confusion surrounding last year’s bankruptcy bill by telling consumers that bankruptcy isn’t available any more. I’ve heard variations from clients who’ve been told that you can no longer discharge medical debt or credit card debt in bankruptcy.

Other bankruptcy attorneys report collectors claiming that they’ve “investigated” the debtor and the debtor “isn’t eligible for bankruptcy.” Others go further and claim they will “report to the appropriate authorities” the debtor if he files bankruptcy.

Balderdash! Bankruptcy remains available to virtually all consumers. It’s more expensive and more paper intensive, but it’s there, and it works.

Collectors rely on creating an atmosphere of fear, shame, helplessness to get their targets to write a check. They count on their ability to convince the debtor that he has no legal options. Not only are they wrong in this case, they’ve violated the Fair Debt Collection Practices Act as well.

Cathy Moran

The most frequent search terms that bring visitors to Bankruptcy in Brief have to do with getting credit after bankruptcy. New clients, saddled with enough debt that they will engage a bankruptcy attorney, at our first meeting either ask about the impact of a bankruptcy on their credit score, or proudly tell me that they have “perfect credit”: that translates as “never having missed a payment.” What they miss in their decision making process is that they can never pay off the credit they have! And their first concern seems to be how soon they can get back into the credit market.

Identity theft and the misuse of credit scores for employment and insurance purposes have heightened our awareness of credit reports and credit scores. This legitimate concern is hyped by those who, having created the credit scoring “game” and cemented their lock on the rules of the game, then want to sell us services to protect us from damage to our scores.

What most consumers don’t understand is that credit scoring is a purely arbitrary analysis, with changing rules controled by each score provider. It is not regulated, objective, or transparent. It seems your score can suffer from having too much credit, too little credit, or even for astutely shopping for better interest rates on purchases.

Let’s focus on our personal balance sheet, rather than our ability to acquire more debt, as a salutory exercise. Let’s look at our savings, our preparation for retirement, the adequacy of our insurance protection as the measure of our financial health. Let’s ask ourselves first how long it will take us to repay the debt we already have . What would we save if we weren’t paying interest on credit card debt?

Let’s learn to find our self worth in something other than the kind of credit card we carry or the credit score someone else assigns us.

Nearly 40% of California homeowners spend more than the target 30% of their income on housing; 15% spend more than 50% . Therein lies the start of financial instability.

Liz Warren’s book on the Two Income Trap identified the quest for schools in better school districts as the reason that two income middle class families were going broke at record rates. The budget simply had no margin for error, or for illness, job loss, or divorce.

So, while the bankruptcy schedules show credit card debt, its probable those credit cards were used to provide the goods for day to day living in a housing market gone mad.