County's bankruptcy growth tops in Colorado

The number of bankruptcy filings in Weld County jumped by 58 percent from 2002 to 2004, the highest growth rate in the state.

The increase contributed to Colorado's highest-ever bankruptcy count at almost 28,000 last year.

Nationwide, more than 1.6 million cases of bankruptcy were filed last year, prompting more attention to a long-standing effort to make it harder to file for bankruptcy because of the belief that it is being abused.

"When I opened this business, I thought people would do it willy-nilly, but I would say that's not the case," said Deb Dahlinger, who 10 months ago opened We The People, which helps people file legal papers without an attorney. In that time, she has seen 200 people come through her doors to file for bankruptcy. "Many people who come in here are emotional, upset, humiliated, frustrated. It's not something I've seen even 1 percent take lightly."

Regardless, federal lawmakers have tried for almost a decade to reform U.S. bankruptcy laws. A bill hasn't yet passed, but it's up for discussion again under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. The bill, backed by the National Association of Credit Management, recently passed the Senate Judiciary Committee, 12-5. It would be the first major revision of U.S. Bankruptcy law in more than a decade. It would require people who can afford to make some payments toward their debt to do so, while still affording them the right to have the rest of their debt erased.

But, it would make it harder to file and wipe out all debts and also make it more devastating on a credit record.

For some, such revisions would come as a welcome change to the system now of allowing people to wipe out their debts completely.

"Bankruptcy now is very easy to declare and not very damaging to your credit record," said northern Colorado economist John Green. "I think a lot of people don't pay as close attention to their finances, knowing that if they do get into trouble, they can declare bankruptcy and stick someone else with the debt."

Bankruptcies hurt the economy in subtle ways, Green said, likening its effects to throwing a grain of sand into a piece of machinery.

"Maybe it doesn't destroy the machine, but it does cause wear and tear," Green said.

Companies plan for bad debt and bankruptcies, but they also pay more for insurance to cover such losses, which reduces their profit margins. Such increases eventually translate to the check-out stand with higher prices to consumers, Green said. The American Banker Association reported recently that American families pay an additional $400 a year in extra expenses for goods and services because of bankruptcy filings.

Greeley attorneys say making it more difficult to file and more devastating would just make bad situations worse, as they see the realities that force people into bankruptcies daily.

"If the bankruptcy bill passes in the form it is in now, it will have a detrimental impact on people who need to file," said Greeley attorney Keith Abbott. "Most people who file bankruptcy aren't going to come in until it reaches a point where it's out of control, or their wages are being garnished. Also, the vast majority of people aren't covered by health insurance through employment, so when they have a catastrophic illness, they're done."

Changing the laws could affect those with high medical bills most.

"You shouldn't just be able to file," said Sara Allen, director of Consumer Credit Counseling Services of Northern Colorado and Southeast Wyoming. "We all need to be responsible for debts we make, but I am concerned about anything that would make it harder to file for low-income families with high medical bills. We even see people with moderate incomes filing because of medical crises."

A recent Harvard University study confirmed that illnesses triggered about half of all personal bankruptcy cases nationally. But others say the fault should be shared by credit-card companies that tempt people to charge up their balances.

"I have no sympathy for credit card companies," Abbot said. "They encourage you to use those credit cards and some people are in a financial position where they simply can't afford to use them, but they can't afford not to."

Most agree that bankruptcy has to be the final option.

Allen recommends people look into her agency's plans that can help people pay their debt in four to five years. If anything, she said, people should look into their options before bankruptcy. "Get some advice," Allen said. "Visit with someone besides an attorney to really look into your choices."

Here is a summary from the Consumer Credit Counseling Service of different types of credit help that are available:

* Credit Counseling Organizations: While several member groups have been formed, the two leading umbrella organizations that many agencies affiliate with are the National Foundation for Credit Counseling and the more newly formed Association of Independent Consumer Credit Counseling Agencies.

National Foundation for Credit Counseling members are predominately known as the Consumer Credit Counseling Services in their communities. Some have other names, but all members carry the NFCC seal to assure that they are receiving services through an agency that is accredited, has certified credit counselors, protects client funds, credits consumers for all debt payments and offers free and affordable services.

* Debt Consolidation Companies. These financial institutions offer loans to settle consumers' debt by paying off individual debt obligations and wrapping all the payments into one loan. Telemarketers or counselors often operate under financial incentives to get as many people as possible signed up for loans, regardless of whether the loan is in the best interest of the consumer.

n Debt Settlement Companies. They will suggest a consumer stop paying a creditor and instead pay into an account with the debt settlement company for six to 12 months. The settlement company will in turn negotiate an account pay-off in a lesser amount with the creditor. The danger in these services: Once consumers stop paying their creditors, the creditors can file negative payment information on consumers' credit reports.

* Credit Repair Companies claim they can "fix" or "repair" consumers' credit. In most situations, consumers can do for themselves what these companies charge hundreds or thousands of dollars to do. In most cases, when a credit repair company repairs a consumer's credit, they are helping to remove erroneous information and/or items more than seven years old on credit reports. Any consumer can do this by obtaining a copy of his or her credit report and filing a request with the credit bureau to remove erroneous account information and account information (especially negative accounts) that have reached the seven-year statute.

when bankruptcy is necessary

* Consider bankruptcy only in extreme situations, after all other attempts to work things out have failed. In considering whether to take this step, first seek competent financial counseling and then legal advice.

The Consumer Credit Counseling Service of Northern Colorado and Southeast Wyoming offers low-cost and even free credit counseling and help in working with creditors to set up repayment plans.

Call for an appointment at (800) 424-2227.

-- Source: Consumer Credit Counseling Service

of Northern Colorado and Southeast Wyoming.

assistance

* For more financial education assistance, contact Consumer Credit Counseling Service, (970) 229-0695, (800) 424-2227 or at www.cccsnc.org.