If you're overwhelmingly in debt, you are not alone.
If you're screening every telephone call to avoid dealing with your creditors, you are not alone.
If you've finally decided to file for bankruptcy protection, you are not alone.
On that last point, perhaps it will ease your shame to know that bankruptcy filings for the period from April 1 to June 30 of this year were the highest in history for a single quarter, up 11 percent, according to the Administrative Office of the U.S. Courts.
The overall quarterly increase was fueled by consumer Chapter 7 filings, which rose 17.7 percent to 362,481 up from 308,028 for the second quarter of 2004. Under Chapter 7, a person's assets are liquidated, except those exempted by law, and debts are wiped away. Such cases are usually simple. The average filer doesn't even appear before a judge.
This recent surge in bankruptcy petitions is largely due to consumers scrambling to file before the new, tougher Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 takes effect Monday.
"We are having a spike in filings such I have never seen in 23 years of practicing bankruptcy law," said Kevin C. Gleason, an attorney from Hollywood, Fla.
More difficult law
How tough is the new law? Debtors will be required to get credit counseling before filing. They have to pass a means test in order to file under Chapter 7. Otherwise they must file under Chapter 13, which requires debtors to pay back some of their debt over a five-year period. Overall, debtors will be scrutinized much harder than before.
With the new law approaching I thought it was appropriate to recommend for the Color of Money Book Club, "Surviving Personal Bankruptcy: Your Guide to the Personal, Legal, and Financial Issues" by Nora Raum (Gotham Books, $20).
This isn't so much a how-to book but a primer on the bankruptcy process. Raum describes the ideal bankruptcy candidate and lays out alternatives to declaring yourself broke. The book also includes the latest changes in the bankruptcy law.
Remember, I told you you're not alone. Raum opens most chapters with stories of the rich and famous who have filed for bankruptcy. For example, did you know Burt Reynolds filed for bankruptcy? Milton S. Hershey, the chocolate bar king and the man responsible for my spreading hips, went bankrupt - twice. Tammy "Stand By Your Man" Wynette filed for bankruptcy. Talk show host Larry King also filed.
"Bankruptcy is a mystery to most people," writes Raum, who has practiced law for nearly 20 years, specializing in personal bankruptcy. "They hear the word now and then, usually in connection with some huge corporation. But they have no idea what it means to people like them. They need basic information to help them decide if bankruptcy might be right for them."
Signs to consider
So how do you know if you may need to consider bankruptcy? Here are some telling signs, according to Raum:
¢ You have no idea how much you owe. "A client will tell me in the initial interview that she has around $20,000 in credit card bills," Raum writes. "But when everything is added up, that figure will sometimes be close to twice that amount. People don't really want to know how dire their situation is."
¢ You have too many credit cards. "Nobody needs three credit cards from Capital One," she says.
¢ You write checks when you know you don't have the money in the bank.
¢ You're hiding debt from your spouse. "If you're rushing to pick up the mail before your wife can get to it, you already know you're in trouble," Raum says.
It helps that Raum is an attorney. She sprinkles the book with first-hand knowledge of how the system works. There's a useful checklist for questions to ask during your meeting with an attorney. There's a section on pre-bankruptcy do's and don'ts. For example, if you're about to file for bankruptcy, don't even think about making last-minute charges on those credit cards you should have long ago cut up.
Overall this is an easy read for a hard life decision.
If you are interested in discussing this month's book selection, join me online at www.washingtonpost.com at 1 p.m. Oct. 20. Raum will be my guest and will be available to take your questions.
To become a member of the Color of Money Book Club, all you have to do is read the recommended book and chat online with the author and me. In addition, every month I randomly select readers to receive a copy of the book, donated by the publisher.
For a chance to win a copy of "Surviving Personal Bankruptcy," send an e-mail to firstname.lastname@example.org. Please include your name and an address so we can send you a book if you win. But if you're trying to file before Oct. 17 don't wait for a free book.
- Michelle Singletary is a columnist for The Washington Post.