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Bankruptcy reform hits women hard

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Under current laws, noncustodial parents who file for bankruptcy cannot discharge their child support and alimony. Under the proposed new law, Miller says, they still can't discharge those debts, but there's a difference. Claims to back child support and alimony would be on equal footing with the claims of credit-card companies. In some cases, "mothers will be coming in after other creditors have received their payment," Miller says. "It's absolutely terrible."

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More pricey to file?

Mr. Ehrenberg sees another change in the new bankruptcy bill that could affect women. Attorneys will now be liable for inaccuracies in a debtor's bankruptcy papers.

"They're going to have to investigate their own clients," he says. "It's widely believed in the bankruptcy community that many attorneys who provide moderate-cost legal services will pull out because they can't afford to do the case for that amount of liability for the same price. It would not be surprising that women would be adversely affected by not being able to find affordable legal representation."

Moran knows firsthand the importance of good legal representation. In her case, bankruptcy was unnecessary, the result of bad legal advice.

"Could you imagine going bankrupt for just $6,000 in debts?" she asks. Still, she has put the experience behind her. Now a sales executive and author, she says, "I have an 'A' credit rating and a beautiful home."

Eva Rosenberg, publisher of TaxMama.com in Northridge, Calif., struggled with mounting debt for 15 years after an automobile accident left her unable to work. She refused to consider bankruptcy as an option. "I knew I had the earning capacity to deal with [my debts]," she says. "Not everyone has that." As a tax consultant who sometimes recommends bankruptcy to her clients, she says, "Sometimes bankruptcy is the best alternative for everybody concerned."

Others offer reassurance that there is life after bankruptcy. A woman who asks to remain anonymous found herself in deep financial trouble as the result of a failed business. She and a male business partner founded a company in New York. After she left the firm, her former business partner defaulted on the line of credit. Creditors placed an $80,000 lien on her personal bank account. A lawyer advised her to file for bankruptcy.

"My credit rating tanked," she says. "The process was terrifying and humiliating at first, but I realized it was a necessary process to get out of a financial mess created by my own business ignorance - signing things I didn't read - and by another person."

Today, two years later, she has one credit card with a $600 limit that she pays off each month. She married recently, and her husband helps her finance certain purchases. She is working to build up her credit rating.

Moran is disappointed that the new bankruptcy bill does not address a fundamental problem that contributes to bankruptcies - the barrage of credit-card offers that encourage people to overspend. "For somebody who doesn't have will power or an understanding of what they're doing with those mailings, it's very dangerous," she says.

Although bankruptcy stays on a person's record for 10 years, legal experts encourage debtors to begin rehabilitating their credit reputation by getting a secured credit card. "Deposit $500 with a bank," says John Maxwell, an attorney in St. Charles, Mo. "Begin making charges and making repayments in a timely fashion."

How to stay solvent

To avoid problems, Ms. Rosenberg urges women to pay attention to household finances. "Do not leave them in the hands of your husband," she says. "Look over all the tax returns before you sign them. If you're not comfortable signing them, file a separate return. Even though it will cost a little more, you won't be responsible for his omissions or his lies."

She also joins other financial experts in warning about the perils of plastic. "Don't run up your credit cards for frivolous things. Think twice before you buy something."

Warren encourages open communication, noting that money is the No. 1 topic that couples find difficult to discuss. "Our files are full of people who were keeping money secrets from each other - people who wouldn't talk about what they spent, what they earned, financial commitments they had made," she says. "That harms not only the relationship but also the family's economic security."

Whatever a woman's financial situation, Warren emphasizes the need for greater confidence, noting that women often feel helpless about money. "Too many women have been taught for too long that it's hard, it's complicated, that only guys understand it and can really manage it. That's wrong."

The bankruptcy bill, she adds, "is just one more signal that women need to take care of themselves first. The safety net is shrinking, and women can't count on anyone other than themselves."

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