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Jubilee! It's Bankruptcy

One man's travels through a fate worse than debt

By P. Joseph Potocki

S HOULDERS squared, jaw thrust defiantly out, I reached for the door to the Federal Bankruptcy Court. It was a warm and sunny spring morning. I'd spent months plowing through paperwork, pulling out clumps of hair and reconditioning my backbone, preparing for this very moment. A strange psycho-kinship with Bert Lahr's Cowardly Lion had grown inside me as I prepared to engage a similarly great, powerful and really scary wizardry. Having for many months played out alternately ruminative and then self-loathing excitations, as though completing this process required each day for my yin to duke it out with my yang, finally, my paperwork was assembled and I was set to enter the vestibule leading to the federal crypt of my financial ruination.

My plan was to swing open the door, beeline it to the clerk's counter, plunk down the fee, file for debt relief and slither away incognito. Instead, I was greeted by two uniformed officers instructing me to remove my belt, empty all pockets and place everything, including my wretched ream of requisite paperwork, onto an X-ray conveyor belt.

That's symbolism for you, subtle as the plague. But only just now has that symbolism dawned on me. Perhaps that's because, when soliciting bankruptcy's scarlet letter, one is more inclined to focus on the deed's radioactive fallout than on some ethereal symbolism, no matter how blatant the empty-pocket motif. Still, I swear I could hear insolvency's cosmic jester squealing himself silly with glee at my filing, for yet another poor mortal shlub had just checked into his Hotel California.

Or, well, maybe not.

Nonexclusive Club

According to the National Bankruptcy Research Center, bankruptcy filings skyrocketed between 2006 and 2007. And that was the first full year the highly contentious Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 was enforced. This draconian legislative gem, a credit-card-industry-writ wet dream come true, makes qualifying for Chapter 7 bankruptcy far more costly and difficult.

Consider for a moment that somewhat more than 300 million Americans are breathing and buying stuff today. Our combined national credit card debt stands at more than $950 billion. That means, on average, each household carries about $11,000 on credit cards alone, never mind mortgages and other ongoing financial commitments.

Chapter 7 leaves the debtor with a nearly clean slate when all is said and done. However, while Chapter 7 provides individuals relief, one's credit is toast for at least seven years. But, once bankruptcy is granted, should one work hard, live frugally and, as penance for sins against capital, endure years of want, one re-emerges a creditworthy phoenix.

That's because capitalism requires that we prodigal sons and daughters return to its fold. Perhaps the authors of the Bankruptcy Abuse Prevention and Consumer Protection Act forgot this. I say that because were he not rehabilitated, the debtor would be unavailable for future capital bleeding.

But even after a Chapter 7 bankruptcy discharge, not all debts go away. Back taxes, child support and student loans do not get eliminated, though unsecured debt (i.e., credit cards) pretty much does. That's the reason why credit card companies aren't too keen on folks filing Chapter 7.

The plastic camp shoved a bill through the 2005 Congress, gifting the credit card companies by screwing the consumer. George Bush, no doubt, took enormous delight in inking this class war declaration.

This bill, commonly referred to as the "New Bankruptcy Law," imposes higher filing fees, mandates that a petitioner pay for and complete credit counseling, and lards on additional paperwork, compelling most attorneys to double fees for bankruptcy services. Most notably, by injecting "means testing," which is designed to disqualify many people who wish to file a Chapter 7, those turned away, should they still insist on going belly up, have been obliged to seek the far more costly and drawn-out [insert horrific organ shrills and a deep dum-de-dum-dum] Chapter 13.

Earlier modern-day bankruptcy laws were designed to give a fresh start to those whose debt load was so heavy they'd never get out from under it. The idea isn't so much an altruistic or magnanimous one as it is a rational understanding that people with crushing debt are a drain on society as a whole. Still, while the intent of this most recent bankruptcy legislation was to inhibit folks from filing, it's failed big-time. The scheme was to punish those who insist on filing by creating smaller, higher and more numerous new hoops for them to jump through, and by levying additional fees while providing a bogus alternative route to debt settlement via industry-funded "nonprofit" debt-collection agencies, established to surreptitiously do the credit card industry's dirty work.

But get this: In 2008, bankruptcy filings far eclipsed those of 2007. More than a million Americans chose to lose, or filed to lose, significant chunks of their worldly possessions—fair, square and legal.

Strike, Struck, Stricken

"Hold on one darn second there, fella," comes the fair-minded retort, "aren't you just excuse-making with fancy smoke and mirrors, aiming to defray your own fiscal missteps and shortcomings at the expense of easy targets? How about addressing your own mistakes and taking personal responsibility for your actions?"

OK, then. You're absolutely right. I take 100 percent full credit for my personal financial tribulations. While there is blame to go around in this inequitable culture, my personal misadventures were definitively of my very own making.

That's partially because I knew better, and screwed up anyway. I tunneled my way into credit default after a lifetime of scrupulously avoiding plastic and massive debt.

Here's how it happened. My wife was working at a brokerage firm and doing pretty well. This allowed me the luxury of a few years of research, writing and lecturing, which, shall we say, didn't exactly pay the bills, even though her work did. Finally, it was gently suggested I find the means by which to supplement my meager income.

I first cast about for ways to bring home the bacon that didn't involve hard work. There wasn't much to choose from. Taking stock of my skill set, it occurred to me that I was passably good at least three things, namely: reading, writing and holding forth. San Francisco being our residence at the time, it struck me that visitors might actually pay me to drive them to and fro, regaling them with fun-filled facts, figures and fables. I'd provide high-end, personally customized tours of the city, Monterey, Yosemite and wine country to cultured individuals with really deep pockets. Hallelujah, these tourists were aching, I was certain, to pay me for a good time!

Jeez—the impenetrable depths of self-delusion. All it took was the two-week 2004 San Francisco hotel strike and its subsequent seven-week lockout to bring my little business to its knees.

I conducted not one tour during the nine-week course of this strike. Once the matter had been settled, the concierges I had so fawningly cultivated chose to do business with other tour firms who'd shown no compunction about crossing picket lines. It was all quite understandable, but understanding it didn't address my ever-mounting debt. And with debt came its attendant demons: vodka, cigarettes, marital anguish and severe depression. I even fantasized a terminal solution.

Fortunately, we decided to cut costs, move out of the city and do the conventional work thing. But even with steady work, the bills kept mounting. Credit agencies assured me I'd not be forgotten. I even took a meeting with a kind and thoughtful credit counselor who told me, "You're fucked."

Fact is, prior to this, I'd long been philosophically opposed to living beyond my demonstrably simple means. I knew credit cards were nothing but trouble, but came to a point in life where I joyfully deluded myself into believing I was ripe to try my hand at business.

I seduced myself into believing that signing up for one, two, three, four—or even five, hell, who's counting—of the siren-sounding offers landing in my mailbox each day would merely jump-start my can't-miss business. I'd bought my own bullshit, and on high-interest credit. Indeed, I'd finance my small business the new-fashioned American way: naively. Damn, it was so quick, and so insanely easy, using credit cards to keep my tiny concern afloat, while fate tap-danced all over it; using plastic to make van payments, insurance payments, promotional costs, taxes; finally, even using plastic to meet basic living expenses, awaiting the big payback.

Bankruptcy Chic

Early American debtors hardly relished being locked in public stockades, suffering the taunts and produce projectiles launched their way. Others spent all their time ensconced in prisons. These unfortunates compounded debts that got them there, with interest. Colonial and even post-Revolutionary imprisonment featured small, stark, stank and drafty jail cells. Disease was rampant, and as in this Bush era, you could be tortured.

  Back then, one's former high standing, philanthropies and/or exemplary national service counted for nothing against owing a buck. Take for example one Robert Morris, chief financier of the Revolutionary War and signer of the Declaration of Independence. Morris was our nation's first Superintendent of Finance, but none of this meant squat when, in his latter years, his investments turned sour. Morris was sentenced and subjected to four brutal years in an American debtor's prison.

I don't claim membership to this earlier vanguard movement but do feel part of a recent groundswell. Call it "bankruptcy chic," though with numbers climbing madly it'll be hard to keep it an exclusive club for long. The way it's going, bankruptcy's destined to become as commonplace as Kleenex.

But for now it remains a timeless and even fashionable club, one whose eminent membership includes Henry Ford, Donald Trump, Milton Hershey, Henry John Heinz and Meat Loaf. Also kings Edward II and Phillip II; Rembrandt, Handel, Mozart and Gutenberg; presidents Jefferson, Lincoln, McKinley and Grant; sporting greats Bjorn Borg, Lawrence Taylor and Johnny Unitas; showbiz stars Lynn Redgrave, Richard Harris, Randy Quaid, Larry King, Mickey Rooney, Debbie Reynolds, Buster Keaton, Margot Kidder and even Donald Duck's dad, Walt Disney.

So in the end, what's going bankrupt taught me? Well, it's led me into a great job, where I'm paid to think. I've dropped 30 pounds, exercise daily, have better than optimal blood pressure, take no medications and show no signs of diabetes. I no longer drink, smoke or suffer depression. I'm a recent vegan convert. Our family lives in comfortable "affordable housing," I've crawled out from my cave and have made new, exceptionally wonderful friends, and I look forward to a long winter of writing, reading, plotting, scheming and dreaming—all well within my financial means. Life today is filled with hope and optimism. If that's a fate worse than debt, well, I'll live with it.

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