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Forbes blogger ignites bankruptcy-debate controversy

Tax attorney ripped for uninformed anti-bankruptcy stance


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Writing in his Forbes' blog Lex Fidelis on June 3, tax attorney Stephen J. Dunn attempts to make the case that "Consumer Bankruptcies Do More Harm Than Good."

Dunn's argument heads south quickly


He begins by outlining the chief differences between Chapter 7 and Chapter 13 bankruptcies and does OK. But then he immediately sets his argument adrift:
Bankruptcy-minded consumers generally prefer the immediate discharge of a chapter 7 liquidation to a protracted chapter 13 reorganization.

By “consumer bankruptcy” I mean a chapter 7 case for an individual.

I am not a bankruptcy lawyer.  But the case against consumer bankruptcies is compelling:

Most consumer bankruptcies are pointless.  Consumer bankruptcy petitioners want to get rid of debt.  But why not just leave the debt there?  Under the Fair Debt Collection Practices Act, a creditor must, at the request of a consumer, stop contacting the consumer about a debt.

Individual preference? Not hardly


First, consumer, or personal, bankruptcy has almost nothing to do with individual "preference." At the urging of the credit-card lobby, the so-called 2005 "reform" in BAPCPA included a means test designed to steer filers away from Chapter 7 and toward Chapter 13. The fact that Chapter 7 filings continue to outstrip those in Chapter 13 is indicative of the economic ruin wrought by Wall Street much more so than any personal preference on the part of those who need bankruptcy protection.

This is one reason to hire a trained, experienced bankruptcy attorney: Your attorney can pretty quickly determine which chapter you qualify for; if it's an either-or situation, a competent attorney (or someone on staff) can fully explain the benefits of one over the alternative.

'Not a bankruptcy lawyer'


Then, Dunn's restricting the term consumer bankruptcy to only Chapter 7 shows the depth of truth in Dunn's subsequent statement, "I am not a bankruptcy lawyer." For sure--as a bankruptcy expert, he might make a pretty decent tax lawyer: Chapter 13 is every bit as much a consumer bankruptcy; in fact, Chapter 7 is also available to businesses that undergo liquidation rather than Chapter 11 reorganization. For that matter, individuals who owe more than the limit prescribed for Chapter 13 would turn to Chapter 11. At any rate, you get the point: Dunn reveals his own ignorance.

Rebuttal from another Forbes blog


His next point is even more ridiculous. Let's turn to another Forbes blog, a rebuttal to Dunn in Money Wise Women, from June 9:
Dunn has obviously never seen the civil filing desk of most state court clerk’s office, notes Susanne Robicsek, a bankruptcy lawyer from Charlotte.  Last year in North Carolina, over one-third of the civil cases were collection actions.  To assert that “creditors rarely sue consumer over debts” is outrageous and factually wrong.

As far as Dunn’s statements about protections against harassment offered by the Fair Debt Collection Practices Act, these limitations on creditor conduct only apply to collection agents, but not to the actual creditor, says Illinois contributor Andy Miofsky.  If a department store or credit card company wants to call you 50 times a day at all hours and berate you mercilessly, the FDCPA will not protect you.

Contrary to what Dunn says, creditors rarely “back off” if a consumer asserts a defense to a lawsuit – so says Jill Michaux a bankruptcy lawyer in Topeka, Kansas.  Indebted individuals don’t know how to answer collection lawsuits and they can’t afford an attorney even if there was a valid defense.  In fact, most collection lawsuits result in default judgments.

This is why you hire a good attorney


Dunn makes further assertions, each showing stunning naivete for a self-claimed tax expert and blogger for two large news organizations; I'll put his statement(s) indented, in italic, my response(s) in bold:
The bankruptcy petition and schedules are signed under oath.  The debtor is subject to criminal prosecution for willfully false statements made therein.

Not to put too fine a sarcastic point on it, but...DOH! That's why we frequently, continually post news and opinion about the dangers of bankruptcy fraud, for example, this post from May 2011. Again, that's why you hire a competent, experienced bankruptcy attorney who stays up-to-date with changes in the law.

OMG!


The filing of a consumer bankruptcy case can have unexpected consequences.  For example, consumers often place low values upon property in their bankruptcy schedules, seeking to bring the property within an allowed exemption.  If the trustee thinks the value is too low, he can object to the exemption, and offer the property for sale.

Perhaps too obvious, but the Trustee could easily be a woman, so here we have sexism on display, in addition to uninformed facts about the power of bankruptcy protection. Further, and more important to those seeking facts to inform their own decisions, Dunn here is using what's known as "red-herring" argument. In essence, he's continuing his earlier baloney by asserting that because bankruptcy fraud is a serious damn charge, no one should file bankruptcy unless doing so is the last possible move on the board.

True--no one should file bankruptcy with a cavalier attitude: it's a very serious, very businesslike decision. On the other hand, with a good bankruptcy attorney to help you, you won't have hobgoblin-in-the-dark problems such as Dunn attempts to conjure: your attorney can guide you toward whatever expertise you need to make truthful, accurate statements to the bankruptcy court.

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If you're interested in learning more about the power of bankruptcy protection, please, browse our site for more information, and consider signing up for a free case evaluation.

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