Addressing the Misconceptions of Bankruptcy
Brooklyn, NY—in 1980, after taking a bankruptcy law course, Gregory Messer switched gears and became a bankruptcy attorney, and has never looked back. Becoming a bankruptcy lawyer was unexpected for Gregory Messer, one of Brooklyn’s most credentialed attorneys working to help consumers and businesses resolve their debts.
At the time when Messer took his course, in 1980, bankruptcy law had recently changed in the United States. He says the changes made bankruptcy “a good industry to get into. Bankruptcy has been an area of growth since 1980.”
Most people have a number of misconceptions about bankruptcy filings according to Messer. “The misconception is people who file for bankruptcy are ‘bad’ people that took advantage of the system. Nothing is further from the truth.”
Instead, according to Messer, bankruptcies are usually filed because of something completely unexpected. There are many reasons why people file for bankruptcy. “Most people file because of divorce, unemployment, or unexpected medical expenses which become overwhelming. It is the exception for people to ‘game’ the law. Sometimes people just don’t make enough money and fall behind.”
In recent years, Messer says that he’s seen significant changes to bankruptcy law, most of them benefiting the consumer. “Generally, exemptions have increased, allowing people to file for bankruptcy and still keep their home, car, tax refund and other property.” This wasn’t always the case, though: “Prior to 2005, changes were much harder, like the means test, which affected a small percentage of people. It made it more complicated and affected higher earners.”
Messer has seen fewer bankruptcy filings in the last two years, following a recession led spike. “From 2011 to 2012, there was a 10 percent decrease, and from 2012 to the first quarter of 2013 there has been another 10 percent decrease.”
Today, one of the biggest factors contributing to new debts and bankruptcies is student loan debt. Messer believes that reforming the bankruptcy code to allow discharge of student loan debt could be beneficial for many Americans. “It used to be that a student loan had to be 7 years old [to be discharged in bankruptcy], but today people get out of school and find themselves struggling with enormous debt. There is income contingent repayment, but that comes with tax ramifications.”
Bankruptcy courts, Messer says, wouldn’t need to let students out of their loans right after they got out of school. “Permit student loans to be discharged after a certain period of time … a discharge after seven to ten years would be a positive thing.”
Messer also has advice for consumers who want to take charge of their personal finances and avoid having a bankruptcy on their credit report. “Only borrow for essential things—to buy a house, education, maybe a car. If you can’t pay off your credit card, don’t make it a habit of adding more to your debt.” He says that it’s important for people to try to maintain employment and recognize when they’re beginning to fall behind—otherwise, small debts can start people down a “slippery slope” toward a bankruptcy filing.
The Law Offices of Gregory Messer provides a wide range of services for individuals and families suffering from the weight of excessive debt.