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# Seeing red: Those bending bankruptcy may just need it
- URL: https://www.smdp.com/seeing-red-those-bending-bankruptcy-may-just-need-it-2/
- Published: 2005-03-29T16:00:00.000Z
- Updated: 2026-10-23T06:28:16.000Z
- Author: David Pisarra
- Tags: Opinion, Santa Monica, #archive-import, Homelessness

*WHAT’S THE POINT?*

The Senate this month passed bankruptcy legislation which the president has pledged to sign that will overhaul a person’s rights to be relieved of their debts and start over. The bill is currently pending in the House, and has passed the House Judiciary Committee.

This bill has been roundly decried by consumer advocates, bankruptcy attorneys and loudly supported by banks, credit card issuers and big business.

Bankruptcy as we know it is about to be radically changed, and that change has dramatic and far reaching implications for all Americans. Mostly for those in the middle class, who are big Bush supporters and voted Republican in the last election. The chickens they have sent to Washington on the wings of gay marriage and the war on terror, are coming home to roost in the form of limits on the Constitutional rights we have.

In sending a Republican/pro-America band of headline-grabbers and panderers to our nation’s capital, the middle class, the rednecks and the ignorant underclass, have consigned themselves to a life of debt service, limits on their medical care and damages, and the erosion of their precious freedoms. These are the Wal-Mart wonders who believe in God, the sanctity of their three marriages and the inherent righteousness of the Ford Excursion.

The pro-life lobby that is for the death penalty has created another Congress that is selling itself to the highest bidder. This year, there are enough of them in one place that they can accomplish their goals.

One of those long-standing goals has been the overhaul of consumer bankruptcy laws. As the bill now stands, it will make filing standard Chapter 7 filings extremely difficult and expensive. Chapter 7 is what the individual files who has suffered a reversal of fortunes. The bill has provisions in it which require a consumer who meets the state’s median income to repay some of their debts. The minimum standard that this sets is if the debtor has the ability to pay $100 a month for five years, he will be expected to go through a repayment program. This is similar to the Chapter 13 bankruptcy filing where a person who has a regular income, but has become overwhelmed, works out a repayment program.

The new regulations will require a debtor to go for both pre-and post-filing credit counseling. They will also require the attorney filing the petition to verify the accuracy of the debtor’s taxes, income, debts and assets. Additionally the attorneys are now going to be liable for any legal costs that the trustee or the creditors incur in fighting illegitimate claims. This set of changes in the bankruptcy code is guaranteed to make the basic Chapter 7 filing, which now costs generally under $1,000, far more. Attorneys will have to expend a great deal more time with their individual Chapter 7 debtors and therefore will have to charge more. They will be liable for other attorney’s fees and those costs will be passed on to the consumers.

This also will cause the current trustees to become more aggressive in their repayment plans and in what they are looking to recoup for the benefit of the creditors. This process is sure to take longer, cost more and be denied to more people.

The average American who is living within two paychecks of homelessness is going to get caught in a web of overextended debt, and a system that has become actively hostile to their interests.

Medical debts are one of the great causes for people to file bankruptcy. In a country that has no universal payer system, and a rising tide of uninsured, more people who now are on the edge will find themselves under the water of financial ruin with little or no ability to access legal help to get them out from under.

As a lawyer, I generally charge a few hundred dollars for a basic Chapter 7 filing. Once this legislation hits the president’s desk and is signed, it will go into effect approximately six months later. At about that time, I will stop helping consumers get a new start. The liability is becoming too great, and it is impractical to charge someone who is on the verge of bankruptcy the amount of money that is needed to justify the work and the risk involved.

In America, we have a long and revered history of allowing people to reinvent themselves. Beginning with the founding fathers and mothers who built a new country from nothing, Americans, more than any other nation, believe everyone deserves a second chance.

When the Constitution was drafted this American trait of forgiving one’s past mistakes, was incorporated so that Congress shall have the power, “To establish … uniform Laws on the subject of bankruptcies throughout the United states.” That means bankruptcy, the right to start over, is guaranteed to us as citizens.

It also means that Congress can make the rules on bankruptcy — when you can do it, how often, what you can get relief for and what you can’t. This Congress is making it almost impossible for many of those most in need of it, to get the relief they deserve.

It’s ironic to me that the red states, those traditional values pockets of bigotry who have created this Congressional assault on the Constitution, also have the highest divorce rates, use of depression-fighting drugs and rates of bankruptcy because their union jobs are being exported to manufacturing facilities in China who make products for Wal-Mart to sell to the people who lost their union manufacturing jobs and need to go bankrupt on the credit card debt they racked up buying their Excursion and getting always low prices — always — at Wal-Mart.

The sad part of all this is that most of these people have no idea that they are causing their own ruin. They can’t connect the dots and see how they were manipulated. They just vote their emotions and are too busy poking their noses in their neighbors business to see the hand that is stealing their wallet. (David Pisarra is a partner in the Santa Monica law firm of Pisarra & Grist. He can be reached at (310) 664-9969 or by e-mail at dpisarra@pisarra.com.)

*Originally published in the Santa Monica Daily Press print edition on March 29, 2005.* [Read the original PDF.](https://s3.us-east-1.amazonaws.com/smdp%5Fbackissues/032905.pdf?ref=smdp.com)