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Bankruptcies put on assembly line: Dallas Bankruptcy Attorneys Play An Important Role Within The City

The number of bankruptcy filings nationwide doubled from 1990 to 2002 and has remained firmly above 1.5 million a year since then. As bankruptcy has become more a part of American life, the stigma around it has lessened.

"There is no social stigma to it anymore," said Craig Jarrell, president of Pulaski Mortgage Co.'s Dallas region. "They just do it and don't look back, and they're ready to rock and roll and get a bunch of debt again." advertisement 

The lending industry decries the rise in bankruptcies and the decline of the stigma. They're again pushing the 8-year-old effort to tighten the federal laws governing personal bankruptcy.

But consumer advocates and bankruptcy attorneys say no one who files is happy about it, and most have been driven to it by a job loss, divorce or health problems. They say that aggressive lenders are partly to blame and that bankruptcy laws should continue to protect the weakest members of society from a life of indebted servitude.

After eight years of failure, backers of the tougher bankruptcy legislation are encouraged by the fact that Republicans now hold the White House and predominate in Congress.

The legislation calls for a stricter "means test" that would shift more people from a Chapter 7 bankruptcy, which usually cancels most debts, to a Chapter 13 filing, under which debtors work out a payment plan with creditors.

"If it ever has a chance of being resurrected, it will be under this Congress and under this administration," said Richard Venable, a consumer bankruptcy attorney in Bedford, Texas.

A bankruptcy filing protects a debtor from creditors while a court figures out how much of the debt can reasonably be repaid. The court can declare none, some or even all of the debt forgiven. But usually creditors get something.

That system generally worked well. But as bankruptcies have soared, opinions on the issue have split along the sharp divide in the American political landscape.

"There's no question people use bankruptcy as a strategy," said Darrell W. Cook, a collections attorney in Dallas. "What I see are debtors who have not spoken to a bankruptcy attorney, who have not the first idea what bankruptcy entails, telling me, 'If you pursue that debt, I'll file for bankruptcy, and you'll never get it.' "

Venable said he and his fellow bankruptcy attorneys are simply addressing a need. Lenders say they're doing the same thing, just offering their services.

"The same people who are excoriating the industry for easy credit were attacking it for not extending enough credit in the late '80s and early '90s," said Jeffrey Tassey of the Coalition for Responsible Bankruptcy Laws. "Lenders have been able to extend credit to people who weren't able to get it. I don't see there's any way there's too much credit."

Under the proposal, creditors may ask a Bankruptcy Court to dismiss a Chapter 7 case if a debtor's income is above the state median income level.

Bankruptcy will still be an option to people who truly can't afford to pay, said Catherine Pulley, spokeswoman for the American Bankers Association.

"The issue that we have are people with high incomes who stick everyone else with the bill because they don't want to pay some of their debts back," she said. "We believe the courthouse doors need to be kept open for people who truly need it. The bill specifically says that anyone below the median income goes straight to bankruptcy. No means test, nothing."

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