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Penalties and Refusals Almost Everywhere He Turned

Yingling said that the proposed rules are not hard and fast and that bankruptcy "judges will have discretion and the power to do what's reasonable if there are small, individual problems."

Even so, Rivers's attorney fees, which totaled $1,100, would certainly go up, said Leonard, "because it will be much harder" to file for bankruptcy, even if the debtor ends up in Chapter 7. "Any way you cut it, poor folks are getting nailed," Leonard said.


Brent Rivers's problems, which began with an accident, cost him his house and a hefty 401(k) withdrawal. (John Fletcher For The Washington Post)

_____In Focus: Bankruptcy_____
Bankruptcy's Next Chapter (The Washington Post, Mar 20, 2005)
Keeping Some Hiding Places (The Washington Post, Mar 20, 2005)
_____3 Faces of Bankruptcy_____
Interest, Late Fees Tripled The Card Companies' Bill (The Washington Post, Mar 20, 2005)
Ulcers and Credit Piled Up Debt (The Washington Post, Mar 20, 2005)
_____Color of Money_____
Mandatory Counseling, A Good Idea in Theory: Michelle Singletary says the bankruptcy counseling provision in the bankruptcy bill "is there as a roadblock. It's a setup, lobbied for by banks and credit card companies, to steer people away from bankruptcy to debt repayment plans."

Rivers knows exactly when all his financial troubles began: on Feb. 16, 1995. That's when he hit a patch of ice driving to work and ended up with lots of medical bills.

Just before his accident, Rivers had taken out a $15,000 home equity loan to make some improvements around the house. "Those repairs didn't get made, but the money got used up" paying medical expenses, Rivers said. At the same time, the credit card bills starting piling up. Until his accident, he said, he was current on most bills. "There were a few slightly revolving, but nothing that wasn't payable."

Rivers twice refinanced his house, then tried to consolidate his loans into a single but lower-interest one. "It was supposed to give us a fresh start, but it snowballed. The interest rate was supposed to be 6.9 percent but came out 12 percent."

Meanwhile, his employer at the time, a North Carolina laboratory products manufacturer, transferred him to Wisconsin, then shut that plant two weeks after he moved. Although the North Carolina facility took him back, it did so on only a "temporary" basis. Although his salary -- then $50,000 -- remained the same, he lost his benefits, including health insurance for the family, which had cost him about $80 a month. Health insurance coverage was picked up by his wife, a secretary at a nearby university, who had to pay about five times as much for the family's health insurance.

Rivers's job lasted a year, until the plant laid off all temporary workers. It took more than a year before he found his current job, also a temporary position.

Elizabeth Warren, a Harvard professor and strong critic of the new bankruptcy measures, said Rivers's case is typical of many families she has interviewed. "The majority of families who file for bankruptcy have been hit with multiple disasters. Someone has lost a job, then gotten sick, or someone is called to Iraq and someone else gets ill. Disasters are not polite; they don't wait for one to be resolved and the family to recover before the next one hits."

Overwhelmed by all his debt, Rivers decided to walk away from the house in 2002, letting the lenders foreclose. But because he had taken out so many loans on the house, he still owed $55,000 even after the foreclosure.

Finally, when a credit card company sought a $4,000 judgment against him last year, he decided it was time to file for bankruptcy protection.

"I wish I had done it earlier, but my pride got in my way. I was afraid and tried to do it myself, but I kept digging a bigger hole." His biggest regret: using his retirement money. Under bankruptcy, that would have been protected from creditors. "That's what hurts the most."

-- Caroline E. Mayer


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