Marketplace economics correspondent Chris Farrell blogged that personal bankruptcies are up in the same month News Cut noted consumer confidence was reported at a recent high. Turns out in May 2009 there were more than 120,000 bankruptcy filings. (Automated Access to Court Electronic Records (“AACER“) via Bob Lawless) In his blog, Farrell went beyond the numbers and revisited a 2006 conclusion:
“Bankruptcy has long been the last legal option for anyone burdened with too much debt. But bankruptcy has always raised questions that go far beyond money. For society, the struggle is finding the right balance between honoring debts and a fresh start.”
Considering the recent study that links bankruptcies to a spike in medical bills (and reportedly most cases had health insurance) I had to wonder if this isn’t filed in the fresh start category…and then I wondered just how fresh is a fresh start. Public Insight Analyst Michael Caputo documented one man’s story:
“[Tom] Cole, of Hopkins, a former Green Beret, was diagnosed with lung cancer in 2004. He had no health insurance due to a divorce – it was his wife who had the job with benefits. He estimated paying more than $40,000 in out-of-pocket costs for treatment. The medical bills devoured his retirement and personal savings.
That put him right on the edge financially. ‘It was a snowball effect,’ said Cole, a source in MPR’s Public Insight Network. It became hard to work as a personal care assistant. He still carried a mortgage. He desperately didn’t want to lose his St. Louis Park house. He took odd jobs. He took in boarders – including two convicted sex offenders who had served their time.
‘I had a heart for these guys,’ said Cole, who described them as low-level offenders. ‘And I could get a little something out of the deal to keep in the house.’ This side of Cole’s tale was conveyed to our Public Insight Network two years ago and was featured on the national program – The Story.
But by 2007, it wasn’t working. So he filed for bankruptcy protection.
‘None of this would have happened if it weren’t for the medical stuff,’ Cole said. The study found, as [MPR Reporter Lorna] Benson put it, that most people bankrupted by illness were middle class. Many of them still had insurance. Cole falls into the subset of folks without an insurance plan.
Cole said it wasn’t just the medical costs that became a problem. As his physical condition made it harder to work, he used credit cards to pay some other bills. Soon it became harder to pay them off. Cole said once one credit card company requested a much larger payback, others followed suit.
By late 2008, he lost a long time client for his personal care services and, because of his weakened state and his age (near 60), he wasn’t being placed with a new client. He found himself without his main source of income. He tried to refinance his home. The bank said no, which didn’t surprise him given the economic meltdown and his poor financial prospects.
Cole quickly recites the date he decided to give up on the house and go into foreclosure – February 17, 2009. Cole still makes some money taking in unwanted dogs from shelters who will give him a payment for the care. He’s doing that from an apartment.
And Cole has applied for public assistance, a circumstance he tried hard to avoid.
‘You got to look beyond your pride at some point,’ he said.”
Did you get a fresh start? What waits for people post-bankruptcy? What should – or shouldn’t – be part of the bankruptcy experience?