Interviewer: It seems like there’s a myth out there that some people will just rack up debts and file a bankruptcy just to screw their creditors. Have you seen that or is that just not accurate?
James Logan: One of the biggest myths out there is that there are people out there racking up debts and living big lifestyles. The reality is that credit card debt is designed to trap you. Up until about 1980, the only people that got credit cards were people who had great incomes and credit and you put $1,000 on your credit card every month and you paid off $1,000 every month. Then, some financial genius figured out, “This is crazy. We should be giving credit cards to people who don’t pay off the balances because then, we can lend them money at 24 per cent and we’re borrowing money at 2 per cent and lending at 24 per cent, that’s a good business”. So, they started to market credit cards to people who weren’t financially stable and financially savvy but the whole intent and the idea was to get you to carry a balance forever and so, that’s why a credit card lending exploded.
The Credit Card Industry Was Built to Basically Get People in Debt and Keep Them There
Based on that, they’ve cracked down on there with the Consumer Finance Protection Board has passed regulations that, “No. You can’t have a minimum payment of $5 a month, you got to have a minimum pay that pays it all in 24-36 months”, to eliminate some of this making payments forever. But the whole lending industry is designed and the credit card industry was built to basically get people into debt and keep them there. You can place blame where you want but it’s very easy and they’re loosening the lending standards to the point where it’s very easy for people to get themselves in debt. But the vast majority of people are just supplementing their income because the cost of everything has gone up so much in last 20 years and income has not been rising.
People That File Bankruptcy Mostly Belong to the Middle Class
Most people that file bankruptcy are middle class. Poor people don’t file bankruptcy as much because they don’t accrue the kind of debts that other people do and they just can’t afford to. If you’re unemployed and you have no bank accounts, you are collection proof. They kind of operator below the bankruptcy radar. Most bankruptcy clients are middle class people who’ve just been struggling to deal with the increasing cost of health insurance, car payments, gasoline, gas & electric, everything’s been going up and their income hasn’t and you supplement it with the credit card, a few hundred bucks a month here and there and the next thing you know you owe $20,000 in debts.
People Tend to Subsidize Their Income by Using Credit Cards which May Result in Perpetual Debt
Interviewer: How often do you see people file and then, fall back down and get back into debt and now, they’re again in same position?
James Logan: Unfortunately, quite a bit, 1) because as soon as you file, you’ll get a new offers of credit and 2), just the way the economy is, it’s just very hard to make it on one income these days and so, people will definitely tend to subsidize their income on credit.
An Individual Can file a Chapter 7 Bankruptcy Once Every 8 Years
Interviewer: So, once you file, how long after can you file again if you’re in a trouble again?
James Logan: You could file a chapter 7 once every 8 years, before 2005, we had a lot of people filed it because of the new law and then, in 2013, we saw another little mini spike and a lot of those people had filed who were caught up in the recession and filed again.
An Individual Can File for a Chapter 13 Bankruptcy as Many Times as They Want
Interviewer: What about 13?
James Logan: Chapter 13, you can file as many as you want. You can also file 13 even when you’re not eligible to file a 7, I guess that’s the fourth reason why people would file a 13 instead of a 7 is because they’ll have a 7 within 8 years, so we could still file a 13 and get you many of the protections that you would in 7; stop the garnishment, stop the utility turn off, stop a repossession. You can file a 13 pretty much at any time.