Bankruptcy can help families rebuild

updated 7:55 a.m. ET Oct. 13, 2005

NEW YORK - Three years ago, life looked awfully bleak to Carmine Warren.

While undergoing surgery and chemotherapy for cancer, Warren and his wife Lynette found that the insurance payments they were getting didn’t make up for his inability to work for weeks at a time, and their bills began piling up.

“It got to the point of: 'Do we pay the bills, do we pay for medicines or do we pay for food for us and our boys?'" Warren remembers.

When creditors threatened to put liens on their home in Orlando, Fla., the Warrens felt they had no choice but to file for bankruptcy.

Bankruptcy is a scary word for many families, who often associate it with failure. But experts say the majority of people who seek bankruptcy protection have suffered a severe financial setback.

The 'big three' causes: they’ve lost a job, their spouse has divorced them or died, or they are hit with heavy medical bills, according to Cleveland bankruptcy attorney Alan Kopit.

While the bankruptcy law that goes into effect Oct. 17 aims to stop consumer abuse of the system by making it harder to wipe out debts, it also can be a lifeline for families like the Warrens who are overwhelmed by situations beyond their control.

“Unexpected things happen in life,” said Kopit, who is legal editor of the Lawyers.com Web site. “Life throws you a curve ball, and you can swing and miss. You should be able to get another chance, a fresh start, and the bankruptcy law allows you to do that.”

Today the Warrens are rebuilding their financial lives. Carmine Warren, now 40 with his cancer in remission, has started his own computer repair business, HomeorofficePC.com, and his wife has been promoted within the mortgage company she works at and is bringing in more money herself.

The couple has a monthly budget and sticks to it, he said. They have an emergency fund to carry them for at least six months, if necessary, and they’re saving again for retirement.

“I learned the hard way you have to be prepared,” he said. “If something bad happened today, I think we could handle it.”

Bankruptcy attorney Brad Botes, whose firm Bond, Botes and Neway PC handled the Warrens’ case, worries that the new bankruptcy law will make it more difficult for financially devastated families to get relief through bankruptcy.

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