'Celeb bankruptcies' show erosion of stigma
Bankruptcy myths may be a niche of 'urban legends'
Financial problems are an equal opportunity malfortune.
The need to hit the reset button and start over cuts across all economic, political and class lines. That's why the bankruptcy code has evolved as it has--because we recognize that it's better to keep tax-paying citizens and business-generating consumers in place as much as possible, rather than punishing debtors as criminals.
Nevada's top economist files Chapter 7
Case in point--consider the chief economist in Nevada; from The Las Vegas Sun, May 24:
The economist who helps predict how much money state government can expect to fund its budget has declared personal bankruptcy, telling the Sun he didn't foresee his own financial meltdown.
John M. Restrepo, chairman of the five-member State Economic Forum, filed for bankruptcy protection in November, citing $905,000 in debt and $360,000 in assets.
In the wake of his filing, Restrepo had to complete an Internet course on personal financial management offered by a nonprofit consumer credit counseling agency.
The credit-counseling certificate
Actually, that last bit is probably inaccurate: before anyone can file a petition for bankruptcy protection, they have to complete a credit counseling session. For my own Chapter 13 filing, I used The Mesquite Group; the first part was done online; the second part was completed over the phone; all in all it took about an hour, spread over the two sessions. I plugged in the code my bankruptcy attorney gave me for her account, and she automatically received an electronic copy of the certificate she needed to start my petition.
Recession triggered implosion of consulting business
Anyway, back to Restrepo; according to a May 21 piece at GreenwichTime.com:
Under state law, the five-member panel's predictions must be used by the governor and state lawmakers to base a budget. The officials have been dealing in recent years with the state's worst financial crisis in decades.
Restrepo said his bankruptcy was triggered by the collapse of his Las Vegas consulting business during the recession. He filed for Chapter 7 bankruptcy protection, which provides a fresh start for individuals, although not all debt is wiped off the books.
"I guess like all of us, who could have predicted the depth of this recession?" Restrepo said. "We knew there was (an economic) correction coming. I saved some money for a recession, but not for the depth of this depression in southern Nevada and the impact it had on our clients and our company."
GOP voters in Kentucky: 'Bankruptcy? So what?'
A case from Kentucky is indicative of the diminished stigma of bankruptcy, compared to years past. From Bloomberg Businessweek, May 12: "Lexington businessman John T. Kemper III is juggling dual lives these days, vying for the Republican nomination to run for Kentucky auditor while digging out of personal bankruptcy after an ambitious real estate development went bust."
Candidate acknowledges 'big baggage'
Kemper is quoted in the story, acknowledging that voters (perhaps especially GOP voters?) might be leery of awarding high office to someone who filed for bankruptcy. " 'I know this bankruptcy is big baggage for the people of Kentucky to take a chance on me as auditor,' Kemper told The Associated Press before a Republican event this week in Midway, in the state's bluegrass region.
" 'But there won't be anybody that will work any harder to keep them out of what I've experienced, because it's no fun.' "
Kemper emerges as GOP nominee
But win he did--from a May 18 article at Kentucky.com (Lexington Herald-Leader):
Kentucky Republicans on Tuesday chose Lexington developer John T. Kemper III as their nominee to be the state's elected Auditor of Public Accounts.
Kemper, 47, is in personal bankruptcy and preparing to lose his home in a foreclosure auction following the failure of his construction business. He defeated state Rep. Addia Wuchner of Florence.
Kemper, who last year unsuccessfully sought the Republican nomination for Congress in Central Kentucky, did not return phone messages left Tuesday night.
Kemper will face Democratic nominee Adam Edelen of Lexington in the fall. Edelen, 36, a former chief of staff to Gov. Steve Beshear, was unopposed in Tuesday's Democratic primary.
Other myths about bankruptcy
I guess the sub-text here is that "shame of bankruptcy" is yet another myth. If you need bankruptcy protection, as a personal business decision, don't let anyone play the "blame game" with you. And while we're at it let's look at some more myths, via excerpted highlights from "5 Myths about Personal Bankruptcy":
1. You Will Lose Your House and Car
If you have significant assets, such as a vehicle or house, you will file Chapter 13 bankruptcy instead [of Chapter 7] , which allows you to keep your assets and set up a payment plan with the creditors, [although in rare cases, homes may be exempt under Chapter 7].
2. You Will Lose Your 401(k) or Retirement Assets
Certain assets are exempt from liquidation and distribution in a bankruptcy proceeding. 401(k) plans and IRAs are including in that group.
3. Your Credit Will Be Ruined
Bankruptcy has a serious negative impact on your credit history--but only for 10 years [and in most cases, the person's credit is already so low that filing bankruptcy is the beginning of cleaning up one's credit--see the section "Living well with bad credit" in our first blog.]
4. You Won't Be Allowed to File for Personal Bankruptcy
Prior to 2005, there were limitations on who was able to file for bankruptcy. Changes to the law allow all debtors to do so now.
5. You Can Only Ever File Once
There are limitations on how many times you will be granted bankruptcy relief, but you can file more than once.
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