Counseling Bankruptcy Clients About Guilt and Debt
By Eric Olsen , Esq . Executive Director , HELPS nonprofit law firm Salem , Oregon
A
senior citizen called me recently , desperate . After months of skipping medicine and meals to make payments to a debt consolidation company , she didn ’ t know where to turn . She was scared , overwhelmed , physically ill from not taking needed medication , and quickly running out of macaroni and cheese . $ 400 a month , taken from her fixed income , left a big dent in her budget . I counseled this senior about state and federal laws protecting social security , pensions , disability , VA benefits , and other forms of retirement income . She understood this meant she couldn ’ t be compelled to pay the old debt . That HELPS could protect her from harassing collectors . When I asked if this helped relieve her stress , she admitted she didn ’ t feel right letting the law protect her specifically . Why ? She felt guilty .
Even though I now work with seniors and disabled persons who receive protected income , it is common for bankruptcy clients to struggle with guilt over being unable to pay old debt . Some of them are quiet and never mention it , but others are quite vocal about it , considering it a very moral dilemma . I believe it is good for bankruptcy attorneys to be reminded of this problem , and to be able to offer counsel that will help clients dealing with their guilt .
The law defines guilt as moral culpability for an intentionally committed or premeditated act . Hopefully , our choices are guided by principles beyond the law , but it is good to recognize the intent of this concept . Life does not always wind its way around the path of our intentions . After having filed over 30,000 bankruptcies , I believe there are very few instances where persons incur significant debt with the specific intention of filing bankruptcy . Instead , it is a loss of job , illness , divorce , a failed business , or simply unwise decisions , among a myriad of other reasons , that results in people considering bankruptcy . It is not enough to simply tell someone not to feel guilty . I believe appropriate comments about guilt and debt can be part of every consultation regarding the decision to file bankruptcy .
A person who files bankruptcy is not a “ bad person ” because he or she cannot afford to repay old debt . Bankruptcy clients can be advised that most lenders are businesses . Clients can be told that lenders know there may be circumstances when debtors cannot repay loans . When lenders loan money or give credit to consumers , they usually attach an interest rate to the loan . This interest rate exists not only to generate revenue for the business – but to protect lenders from possible risks . They know there may be circumstances when debtors cannot repay loans . While many lenders seek to capitalize on guilt to encourage repayment , loans are contracts made with the implied understanding that performance – repayment of the loan – may not be possible . Failure to repay outstanding credit card or old debt is never a crime in America . Enforcement of these loans may only be sought through the civil courts .
When I counseled with clients for over three decades about bankruptcy , sometimes I found it helpful to explain the origins of bankruptcy . How in the original constitution , ratified in 1789 , our forefathers gave congress the power to draft “ uniform laws on the subject of Bankruptcies ” throughout the United States . Although it took a while , Americans came to realize that we didn ’ t want the system that existed in Europe , where persons were thrown in jail if they couldn ’ t pay their debt . I would explain that bankruptcy laws were passed to give persons , honest , but unfortunate debtors , a fresh financial start .
I would explain that Americans do not want the poor to suffer . Elected lawmakers , on federal and state levels , have repeatedly passed legislation
8 CONSUMER BANKRUPTCY JOURNAL Spring 2017 National Association of Consumer Bankruptcy Attorneys