The Biggest Misperceptions About St. Louis Bankruptcy

Over the years, I have done thousands of St Louis bankruptcy consultations. Even when those consultations do not result in the individual hiring us, at least they walk away with a much better understanding of how this area of law works. Because believe me when I tell you, if there is an area of law in which people have been fed inaccurate information (or just flat out lies), it is the practice area of bankruptcy!! So with this article, I’d like to dispel a few of the worst misperceptions folks tend to have (and maybe even a few funny stories thrown in for the heck of it!!)

Without a doubt, the single biggest misperception that people have about the filing of a St Louis bankruptcy is that will somehow put them in an even worse financial position in the future. Nothing could be further from the truth. The government describes the filing of a bankruptcy to be a “fresh start / clean slate”. It is a chance to wipe the slate clean, start fresh, and rebuild. For instance, most folks can expect to see their credit score rise by about 100 – 125 points within the first year after filing. That’s if you just sat around on the couch for the next year (because you can be more aggressive about improving your score, so that it will rise more quickly). And then within 1 ½ to 2 years after filing, your credit score will be back up to where you really want it. So this climb will not of course happen overnight; but way sooner than most people think.

And again, that is the whole point: the filing of a St Louis bankruptcy will quite literally allow you to rebuild your credit rating within a relatively short period of time (by wiping out all of your debts). So if the goal of a bankruptcy is to rebuild; and the effect of the bankruptcy is to get rid of all the debt that has been weighing you down (both mentally and financially); then why in the world do so many people still have the impression that filing a bankruptcy will make their lives worse (not better)? Why do folks still come into my office (in 2018) and tell me that they are already resigned to the fact that they are totally screwed?? It’s a really interesting question, and I think I have an answer.

In April 2005, the US Congress passed a sweeping reform bill that significantly changed the world of bankruptcy in America. The timing of this bill could not have been more carefully planned: George W. Bush had just been reelected the year before, Republicans held significant majorities in both houses of Congress, and the time was right to push their pro-business agenda. On this list of conservative goodies was privatizing Social Security, getting rid of financial regulations, gutting environmental protections, reducing the strength of unions, etc. But very high on this list of priorities was bankruptcy. For years, the credit industry had complained loudly about how much money they were losing when people filed for bankruptcy protection. And now the stars had aligned just right for them!

So a team of lawyers working on behalf of the credit industry started drafting legislation that would ultimately become the “Bankruptcy Abuse Prevention and Consumer Protection Act of 2005”. The speed at which this bill flew through Congress was impressive. It was initially introduced on February 1, 2005 in the Senate, and eventually signed into law by President Bush on April 20, 2005. Two and a half months, from start to finish. The argument went something like this: if the credit industry (like credit cards companies, payday loan centers, and various other lenders) did not have to suffer so many loses due to discharged debts in bankruptcy, they could turn around and pass the savings on to consumers in the form of lower interest rates on future loans and lines of credit. This was of course a nice sentiment, but it didn’t exactly turn out this way (as evidenced by the fact that the credit industry continued to increase their prices and rates after passage of the new law).

You will notice in the title of the law that one of its primary objectives was to prevent people from abusing the bankruptcy system. In the eight years prior to the passage of this bill, the credit card industry spent more than $100 million lobbying Congress by telling anyone who would listen that the American people were a bunch of entitled thieves who were purposefully taking out credit cards so that they could live the high life by fraudulently running up debts that they had every intention of getting knocked in a bankruptcy. In other words, the banks went out of their way to paint a picture of Americans who spend with abandon, but who do not ever want to take responsibility for their debts. This reasoning was plenty good for the Republican majority, who parroted this line over and over again on cable news. It was a symbiotic relationship made in heaven: a pro-business Republican majority handing a giant Valentine to one of their largest benefactors (credit card companies, and the banks that finance them).

With all the cable news coverage, newspaper editorials, and constant bickering on both sides of the aisle, the American people could be forgiven if they ended up believing that filing a bankruptcy after October 2005 was going to be next to impossible (especially with all the obstacles that the new law put in their paths). For instance, there were two new provisions in the new this law that deeply confuses people to this day: one such provision stated that if you filed a Chapter 7 bankruptcy, you could not file another Ch7 until a full eight (8) years had passed; the second provision stated that regardless of which chapter of bankruptcy you ended filing, it would stay on your credit report for ten (10) years.

These provisions seem pretty straightforward. But I can’t tell you the number of times someone has told me the following: “Look, I know I have no choice here. I’ve got to file for bankruptcy. But I also know I won’t have any credit for the next ten years!!” Somewhere along the line, people have become absolutely convinced that a bankruptcy filing will simply destroy them financially (and no amount of insight and wisdom from me will change it). I even had a client come in for a consultation one time, and although his plan was to file alone, he brought his wife with me. I certainly have no problem with this (because even if the spouse chooses not to file a joint bankruptcy, it is very often helpful to get his/her insight about the various debts and assets in the household). But the wife was adamantly opposed to the idea of anyone filing for bankruptcy. When I asked her why she felt that way, the wife responded with an answer that makes me smile every time I think of it: “Because when you file for bankruptcy, you lose your right to vote!!” Now if that statement doesn’t show the level of misinformation that is routinely pumped out to the public, it don’t know what does!

But once folks have had a chance to ask their questions in a regular consultation, and I am able to address their concerns, they almost always leave with a certain sense of relief. Why? I think it is because I not only dispel all the myths they had been carrying around in their heads, but I also take the time to help them thoroughly understand how the entire process works. In other words, I provide each of my clients with a really in depth assessment of bankruptcy, and do not gloss over any subject (or sugar-coat any of its provisions). Instead, what you get from us is an unvarnished explanation of your rights, your options, and of the pros and cons of each chapter of bankruptcy. Every once and awhile, I explain something to my clients that they did not want to hear (or that they wished would go a different way), but I firmly believe that being a straight-shooter from the very beginning is far better than trying to explain a problem later on in the process!! So please do give us a call, and we will get to work on your case immediately!

At The Bankruptcy Company, we want to make sure that you receive the very best bankruptcy services in all of the St Louis Missouri area. Our team will get you back on your feet, help to dramatically improve your financial standing, and put you in the best position possible for the future. The attorney fees for a standard St Louis MO Chapter 7 are $675, and the upfront fees for a St Louis MO Chapter 13 are $300. But the initial consultation is free of charge!