Do you know anybody who has gone through bankruptcy? Of course you do, you say. You’ve represented hundreds, perhaps thousands of debtors in your consumer practice. Or you’ve pursued thousands of debtors through bankruptcy in your effort to recover cars or houses or mobile homes. Or you’ve listened to thousands of debtors at first meetings of creditors over which you’ve presided as a trustee. Or you’ve heard thousands of motions for relief from stay, presided over thousands of confirmation hearings in your capacity as a bankruptcy judge—maybe you’ve even seen thousands at discharge hearings (Judge John Akard, in Lubbock, Texas, still conducts discharge hearings in chapter 7 cases).

Just this last month, I’ve encountered a number of people who have gone through bankruptcy. Only I didn’t meet them in court. One I met at a party. Another was the carpenter who did some work on my house. A third was the fellow who owns the business that installed some flooring in my house. And a fourth I ran into at a restaurant the night Maryland beat North Carolina in basketball (yes, I’m a graduate of Maryland).

Actually, it’s not all that uncommon for this to happen to me. It’s probably not that uncommon for you either, if you are a bankruptcy practitioner, trustee or judge. With more than 1.3 million cases filed in 1997 alone, some 5 million people over the last seven or eight years have gone through the bankruptcy process. That doesn’t include the countless other people who were touched fairly directly by someone else’s bankruptcy case—spouses, ex-spouses, children, small business owners, employees. Bankruptcy, for better or worse, has become an increasingly common phenomenon, touching an increasingly wider sector of the population. No wonder, I suppose, that newspapers are starting to write editorials, and members of Congress are starting to propose bills.

But running into people the way I have this last month, outside of court, and in the normal course of life, gave me a slightly different perspective. People are, I suppose, more candid and relaxed outside of court, and more willing to reflect on the experience with a little distance that’s not available when they are caught up in the middle of the process.

The Party

He was one of those fellows who had been caught up in the real estate boom and bust that swept over Texas in the 1980s. Like so many (perhaps, some have said, like all) developers, he had taken a number of real estate limited partnerships through bankruptcy. He’d even gained a little notoriety in the process, having taken on a lender and having won at the lower court level. Those days were long since past for him now. He was still in the real estate development business, but the market in Austin is now one of the strongest in the Southwest. He is doing very well these days—very well indeed.

We talked a bit about his perspective on the bankruptcy process, now that some six or seven years had passed. He had no regrets whatsoever about having had to go through the process. In fact, he said, all he had ever wanted to do during the entire bust cycle was to make sensible business workouts, to cut business deals that made market sense. Unfortunately, he found himself in an environment in which lending officers apparently felt themselves left with few options and very little flexibility. How interesting, I thought as I listened to him, that he personalized the experience. He didn’t think of the lender qua lender. Instead, he remembered the lending officer.

Was he happy with the representation that he received during the case? Yes, he was. He had hired the best lawyer in those parts, he said, and that lawyer had produced great results—he’d done as good a job as you could expect a lawyer to do. Of course, the case was ultimately resolved by a workout that was achieved as a result of the rapport that he had built up over the life of the case with the lending officer. Perhaps he could have made a better deal, he said, perhaps his legal position was strong enough to have extracted more from the lender—but it made no business sense to take a chance on the courts at great litigation costs when he could simply make a deal that would allow him to get back to what he wanted to do. He was not, he said, in the business of being a bankruptcy debtor. He wanted to get back to doing real estate.

The Carpenter

The carpenter and I were measuring the house for some molding and deciding what else needed to be done, so we stopped business for a while and took a coffee and bagel break and chatted about other things. I told him a little about my job (he already knew what I did), then he told me that he had filed a chapter 13 case some years back. He couldn’t remember the name of his lawyer, but he certainly remembered the chapter 13 trustee (that would be Al Olson, the standing chapter 13 trustee in San Antonio). He remembered that he had been helpful, but kind of "strict." Yes, he had finished the plan, though he couldn’t remember at all whether it had been a full-pay plan (another frightening thought). He no longer used any credit cards—if he couldn’t pay cash for it, then he didn’t buy it.

I asked him why he filed. He had no choice, he said. If you were in the building trades business in the 1980s in Texas, then you either filed or came close to filing, he said. His debts were not all that spectacular, but the work dried up and there was no other option. Still, on reflection, he thought he could have avoided having to file if he hadn’t been quite so oblivious to just how much credit he had been building up. These days, it didn’t much matter. He couldn’t really get credit very easily, but he didn’t much need it either. So, did he regret having filed? Not particularly. It was just something that had to be done at the time, and now it was over. Had it been traumatic? Well, he wouldn’t want to do it again, but it wasn’t really all that bad. He’s just glad the economy has picked up again so he can make a living wage.

Another Perspective

Are the stories or the insights all that dramatic or unexpected? Not really, but the encounters made the process so much more personal. These are not bad people or good people, they are just people, dealing with life’s unpleasantries and using the tools at hand to do so. Sometimes, I think that talking to the waiter at the Palm Restaurant about his chapter 13 case might deliver far more insight to members of Congress than would hours of Judiciary Committee hearings. No, I don’t really know whether one of the waiters at the Palm went through chapter 13—but it’s not unlikely, when you think about the statistics. And, come to think of it, it wouldn’t be a bad thing for a few judges and trustees either.