- The video discusses bankruptcy and its consequences
- Personal bankruptcies have ranged from 800,000 to 1.5 million per year
- Bankruptcy offers a fresh start from debts but comes with social stigma and credit report implications
- The credit card industry pushed for bankruptcy reform to prevent abuse, resulting in a more complicated and costly process
- There are two main types of personal bankruptcy: Chapter 7 and Chapter 13
- Chapter 7 wipes out debts and allows for a fresh start, while Chapter 13 reorganizes debt and requires repayment over 3 to 5 years
- Chapter 13 is more expensive and less likely to result in discharge
- Attorneys may guide clients towards Chapter 13 for financial gain, potentially leading to racial disparities in recommendations.

- The study's findings show that black debtors are more likely to choose Chapter 13 bankruptcy over Chapter 7, indicating discrimination against black people in the bankruptcy system.
- Suzy Orman's claim that most bankruptcy filers file twice is incorrect, and many who do file a second time do so due to factors beyond their control.
- Non-dischargeable debts, such as student loans, taxes, and criminal penalties, limit the effectiveness of bankruptcy.
- Mandatory credit counseling courses are often seen as patronizing and ineffective.
- The 2005 bankruptcy law made bankruptcy harder to complete and disproportionately affected poorer neighborhoods.
- Elizabeth Warren has proposed the Consumer Bankruptcy Reform Act to overhaul the bankruptcy system, but its passage is unlikely without Republican support.
- An alternative credit counseling course that is less insulting should be offered.

- There are two main types of personal bankruptcy: Chapter 7 and Chapter 13.
- Chapter 7 allows for most debts to be discharged, while Chapter 13 works differently.
- The current bankruptcy system is designed to be confusing and discouraging.
- Instead of watching videos about budgeting, the speaker suggests watching a video of a man feeding raccoons hot dogs.
- Filing for bankruptcy should be simple and straightforward.

- The video discusses bankruptcy and its consequences, including the social stigma and credit report implications
- There are two main types of personal bankruptcy: Chapter 7 and Chapter 13
- Chapter 7 wipes out debts and allows for a fresh start, while Chapter 13 reorganizes debt and requires repayment over 3 to 5 years
- Attorneys may guide clients towards Chapter 13 for financial gain, potentially leading to racial disparities in recommendations
- Black debtors are more likely to choose Chapter 13 bankruptcy, indicating discrimination in the system
- The 2005 bankruptcy law made the process more complicated and disproportionately affected poorer neighborhoods
- Elizabeth Warren has proposed a reform act, but its passage is unlikely without Republican support
- A less insulting alternative credit counseling course should be offered
- Filing for bankruptcy should be simple and straightforward.

John Oliver details why people file for bankruptcy, how needlessly difficult the process can be, and the ways we can better serve people struggling with debt. 

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Our main story tonight concerns bankruptcy.

You probably know it from being the worst possible outcome on Wheel of Fortune, aside from hugging Pat Sajak or winning a Mitsubishi Mirage.

Or maybe you're familiar with it through ads for bankruptcy lawyers like this 1.

Once upon a time, there was a fair maiden named Mary.

Mary lived a storybook life, until her prince charming was smashed from his steed.

Her champion had been gravely injured, and a pox had fallen upon her house.

I've helped thousands of clients like Mary, and I can probably help you get a fresh start.

From an unmarked van fully mean-guzzling Mary's husband, to him surviving what appear to be surprisingly minor injuries, to that lawyer claiming he's helped thousands of clients like Mary, meaning that in the Chattanooga area, there are somehow thousands of women who've watched their husband get shit-stomped by a cargo van, and then take what can only be described as a gatling gun of mail to the face.

If that is true, they've got a way more lucrative lawsuit than a bankruptcy case.

What that ad is promising, though, is really attractive.

And it's something a lot of people have turned to.

Over the past decades, the number of personal bankruptcies filed each year has ranged from about 800,000 to 1 and a half million.

And many worry that once the current pandemic assistance stops, more and more people will need the type of help that bankruptcy offers.

Because, very basically, bankruptcy is a legal procedure by which those who are deeply weighted down by debts can get out from underneath them and then have a chance to start anew.

Which is good, although it does come with some consequences.

It will be on your credit report, and there tends to be some social stigma attached, as exemplified in this clip from Shark Tank.

Jeff, I understand your decision to go bankrupt.

who are gonna get the wrong message from what you're saying.

Well, hold on, because that is a terrible lesson.

And you, Kevin O'Leary, are hardly 1 to be calling someone's decisions radioactive, given that you invested in companies with business models like, Put Your Face on a Potato, Look like an idiot on a unicycle, and Toy Guru, the Netflix for toys whose mascot always looked like it was searching for a place to take a shit.

And, which interestingly, filed for fucking bankruptcy.

So I'm sorry, Kevin, but to me, that makes you radioactive.

But that broad-brush stigmatization is common and completely misguided.

Because bankruptcy is not solely caused by bad decisions.

It's often caused by bad luck, unavoidable challenges like job loss, divorce, surprise medical bills, or perhaps even, you know, a once-in-a-century global pandemic.

And despite bankruptcy often being characterized as an easy out, the way it's currently set up, it's sometimes not an out at all, as this couple learned.

Before you're done and over with, you're definitely looking to spend at least $1,000 to claim bankruptcy.

Yeah, a lot of people can't afford to go bankrupt.

A true sentence that fundamentally doesn't make sense.

Like, Sonic Drive-Ins advertise in cities where there are no Sonic locations.

Or the sequel to Now You See Me wasn't called Now You Don't, or Elon Musk doesn't fuck his cars.

That is the face of a man who's at the very least measured the circumference of the charging point.

So given all of that, tonight, Let's take a look at personal bankruptcy.

Our modern bankruptcy code was enacted in 1978.

Interestingly, around the same time that the credit card industry began to enjoy a period of steady deregulation, which worked out very well for them, because they marketed themselves aggressively and, during this time, consumer debt began to sharply rise.

And what the industry clearly wanted was people stuck in a lucrative cycle of minimum payments, late fees, and interest hikes.

What they didn't want, spoiling that, was people cutting the cycle short through bankruptcy.

So, by the late 90s, they were lobbying senators like Chuck Grassley hard to curb what they framed as bankruptcy abuse.

Basically arguing that people who could afford to pay were using bankruptcy as an easy way to not pay bills and then pass the costs on to the rest of us.

And Grassley seemed more than happy to repeat some of the industry's talking points.

There's not a single family in America, low income or high income, that is not paying part of the cost of bankruptcy.

40000000000 dollars cost to the economy every year.

The average family pays 400 dollars a year because deadbeats abuse the system.

Grassley dropped that shocking fact with the confidence of a man who would later tweet from his government account, Windsor Heights Dairy Queen is good place for you know what.

The thing is, though, that $400 figure is total nonsense.

No 1 knows for certain where it came from, and Despite it turning out to be demonstrably false, the credit card industry pushed it hard to create a narrative of widespread irresponsibility and abuse around bankruptcy.

But it's a little hard to take moral grandstanding from credit card companies who were all too happy to help people get into significant debt, even if they had just declared bankruptcy.

Barely out of bankruptcy court, Joan Burnett opened her mailbox and there it was.

The chance for a shiny new credit card, the first of many.

I think I hung on to it for a day and then I thought, oh, no, you're not gonna be that crazy.

The banks are giving out credit with a reckless disregard for the consumer's ability to repay.

Yeah, that Max Weinberg impersonator is absolutely right.

And so by the way, was Joan, whose self-restraint I really do admire there.

Imagine the expenditures that I could've avoided by simply saying, no, John, you're not going to be that crazy.

Ask yourself, do you really need this item?

But years of lobbying by the credit card and banking industry ultimately resulted in a hugely significant 2005 bankruptcy reform bill, which made it far more complicated to file for bankruptcy than it had previously been, which in turn made it far more costly, which meant many people ended up in a situation where they couldn't afford to go bankrupt.

And to understand our current system, a key thing to know is that there is not 1 main kind of personal bankruptcy.

There are actually 2, Chapter 7 and Chapter 13.

Chapter 7 is what you commonly think of as bankruptcy.

Your debts are mostly wiped out, and while you can hold on to a few essential assets below a certain threshold, the rest can then be sold to pay off your creditors.

It takes a few months to complete, but then you do get your chance at a fresh start.

That is more of a reorganization of debt.

Basically, your finances get examined to work out how much you can afford to pay into a repayment plan for 3 to 5 years.

And if you make all the payments in that plan, at the end of it, your debts do get discharged.

You don't have to give up assets like a house or a car, But, and this is a huge but, if you miss even 1 payment, your case could be dismissed and the whole deal is off.

You're essentially all the way back to square 1.

And the uncomfortable fact is, this happens in most Chapter 13 cases.

Because only a third actually make it all the way to discharge.

And chapter 13 is also actually much more expensive to file.

Because while attorneys charge on average about $1,300 to file chapter 7, for chapter 13, they generally charge about $3,800.

So you might be thinking, well, if Chapter 13 is more costly, more difficult, and less likely to get you a genuinely fresh start, why would anyone choose it?

Well, for some, it might be the right fit.

Remember, it gives you a chance to keep your house, which you might need to live in, and your car, which you might need to work.

But for many, many more, Chapter 13, despite costing 3 times as much in the long term, can actually seem like the better financial option when you file.

Because Chapter 7 generally requires you to pay lawyers up front.

Whereas Chapter 13 can be different, as law firms can be eager to point out to you.

Are you looking to get a fresh start financially?

Then call the bankruptcy attorneys at Wooten & Wooten.

We even offer a no-money-down Chapter 13 plan.

Okay, first, get the fuck out of my void, Wooten.

I know I don't technically own the concept of sad white emptiness.

Jared Leto's got the market covered on that 1, but I will be damned if I let this adult who looks like he just made a wish to be big steal my whole vibe.

But the point here is, if you are already in a bad spot with your finances, which you probably are, if you're considering bankruptcy, no money up front might not just sound good, it might be your only option.

The worry is that some lawyers guide their clients to the more expensive Chapter 13 when they'd actually be far better served with Chapter 7.

And if you know anything about America, it will not surprise you to learn that when researchers ran an academic experiment, they found attorneys were more likely to recommend Chapter 13 to a hypothetical black couple, called, by the way, Reggie and Letitia, than they were to a hypothetical white couple called Todd and Allison.

And putting aside the question of whether the researchers plucked Reggie and Letitia from the big book of stereotypical, but hopefully not offensively so, black names.

The fact is, the study's findings do help explain why nationally, the odds of black debtors choosing chapter 13 instead of Chapter 7 were more than twice as high as white debtors with a similar financial profile.

So even bankruptcy discriminates against Black people, which is coincidentally the cover story on this month's issue of Yeah, No Shit magazine.

And the fact that people are often pushed into the form of bankruptcy with far less successful outcomes, mean that they can end up having to file bankruptcy again down the line.

And knowing that makes it a little hard to see financial experts like Suzy Orman broadly frame repeated filing as a moral failing.

Most people who claim bankruptcy once, claim it twice.

So, if you are claiming bankruptcy, you have got to learn.

Because if you get yourself into that situation again, If you go out and you rack up all this credit card debt and all this stuff again, and you have to claim bankruptcy again, then I say, shame on you.

Suzy is offering repeat bankruptcy filers the shame on you, normally reserved for dogs who peed on the carpet, and nosy pharmacists in Magnolia who've asked Julianne Moore 1 too many questions.

I have sickness all around me, and you fucking ask me my life?

First, experts say that Orman's claim that most bankruptcy filers file twice is just wrong.

But much more importantly, even those who do end up filing a second time often do so due to factors that have nothing to do with recklessness.

Like, for instance, getting pushed into a Chapter 13 bankruptcy that was not right for them.

And there is something else that can significantly limit the help that bankruptcy can provide.

Because there are whole categories of non-dischargeable debts.

Debts that even bankruptcy cannot get rid of.

You typically can't wipe out debt from criminal penalties, taxes, or child support through bankruptcy, and there is another massive category, as this woman learned.

31-year-old Radmila Suleymanova graduated with a master's from New York University in 2008 during the depths of the Great Recession.

Jobless, she quickly defaulted on her $80,000 student loan bill.

Oh, well, I'll just file for bankruptcy like everyone else is doing.

And then you realize, no, the only way to get away from your student loan debt is to die.

And to communicate just how bad student loan debt is as a generational dead weight on millennials, I guarantee you, anyone with student loans watching this right now heard $80,000 and thought, yeah, I don't know, I've heard much worse.

Because yeah, she could have bought this entire three-bedroom, two-bathroom house in Indianapolis, but who really needs a place to live when you have a framed eight-and-a-half by 11 piece of paper with your name on it.

That can, just like a house, keep you safe from the rain.

And if all that weren't bad enough, our current system adds insult to injury through mandatory credit counseling courses, which can be exactly as patronizing as they sound.

Even bankruptcy judges have called them inane and a procedural hurdle without value or consequence.

With 1 even noting a course referred participants to the local library for resources on bankruptcy and recommended they seek a job making higher wages.

And I'm sure they had never thought of doing that before it was very cleverly pointed out to them.

And if it seems that these courses may have limited value, 1 that we found online even seemed to reluctantly acknowledge that fact.

Your attorney may have gone over your particular situation with you in their office already.

Perhaps they explained why credit counseling will not work for you.

Many debtors, therefore, believe that this mandatory credit counseling exercise is pointless.

We hope instead you will take a more positive view of this mandatory course.

That's basically an admission that the whole thing's a waste of time.

Although, quick question here, why is the attorney there cartoon me?

He's wearing my glasses, he has my bangs, he's negging an unwilling civilian while waving around a boring amount of paperwork.

And while at best, an objectively hunky cartoon lecturing you on your finances is annoying, at worst, it can be actively insulting because the assumption in these courses is that you are in this position due to reckless personal behavior.

But imagine how that argument feels if you, like this woman, went bankrupt after having to leave your job to take care of your son who died from cystic fibrosis.

In September, we sat down to take the credit counseling course, and, it was sort of a slap in the face, honestly.

And we have not yet finished that course.

We logged off and needed to walk away from it for a little while.

And we'll need to do it again after we actually go through the filing process and meet with the judge.

It's a requirement after you file as well.

So that you can, I guess, get an idea of how to not do the same thing again in the future?

Which is an incredibly hurtful idea that I'm not looking forward to.

Because having a course suggest that there is a way not to have your child die again in the future is a fucking insult.

And it is terrible that she not only had to go through that, but then had to rehash it in the Senate in an attempt to get that requirement changed, which, by the way, it wasn't.

And the truth is, so much of what is wrong with our current bankruptcy system stems from that 2005 law that I mentioned to you earlier.

Expanding the non-dischargeability of student loan debt, that was in there.

The mandatory credit counseling classes, that was in there, too.

The law also made bankruptcy harder to complete, adding over a dozen ways that someone could make a technical error and be dismissed.

It was a huge win for the credit card companies, and for all the assurances from Grassley and others that it would target high-income people abusing the system without hurting those of lesser means.

After it passed, bankruptcy filings dropped disproportionately in poorer neighborhoods, with filings there decreasing 32 percent more than in rich ones.

Showing that, as always, When things are designed to become harder for everyone, for the rich, they just become a bit more expensive, and for the poor, they become basically impossible.

Well, ideally, the people responsible for that 2005 law would acknowledge that our system badly needs fixing.

And coincidentally, 1 of the most prominent backers of that law is actually the fucking president now.

Joe Biden is from Delaware, home to some of the biggest credit card companies, and his support was crucial in getting the 2005 law passed.

And it is not like he wasn't warned that it could lead to trouble.

When it was being debated, Elizabeth Warren, then a Harvard Law professor studying bankruptcy, testified about how medical debt ruins people's lives and how this bill could significantly hinder their 1 remaining chance to get out from underneath it.

And Joe Biden kept shifting focus back to the poor creditors who wouldn't get their money.

Until we fix the broken health care finance system, those families have to turn somewhere.

And that means now, they turn as a last ditch effort to the bankruptcy courts.

And that means they turn to asking the people that they borrowed money from to pay for their health care costs, right?

We're gonna ask the gas company, the drug store, the automobile dealer, to pay for the broken system.

Okay, but that's not really how this works, is it?

It's not like we're living in some small town in the 1920s, racking up debts to the corner store for groceries, the butcher shop for meat, and the local pharmacy for cough drops laced with weapons-grade cocaine.

No, we're living in a world where medical debt is out of control, and people have envelopes rammed through their door every day, screaming that they're pre-approved for a credit card.

Now, the good news is, in December, Elizabeth Warren proposed the Consumer Bankruptcy Reform Act, which would completely overhaul our bankruptcy system.

It would eliminate excessive paperwork needed for filing, thereby lowering attorney costs.

It'd make student loan debt dischargeable.

It'd get rid of the requirement for a credit counseling course, and it'd combine Chapter 7 and 13 into a new, more flexible Chapter 10.

It's a combination that would be an improvement, sort of like Burger King's chicken fries.

Little bit chicken, little bit fries, all in a box that looks like I asked my kids to draw me from memory." And while Biden has broadly expressed support for Warren's reforms, the fact is, her plan is unlikely to pass in its entirety because it would need 10 Republicans in the Senate to get on board, because Democrats like Joe Manchin and Kyrsten Sinema are still in a death cult over the filibuster for some reason.

But the fact is, something big needs to happen here.

Because we badly need to get our broken bankruptcy system working again for people who desperately need a lifeline.

And meanwhile, while we wait for Congress to act, the very least we can do is offer an alternative credit counseling course that isn't quite so insulting.

If you're watching this video, chances are you've hit hard times.

Maybe your husband was pancaked by an unmarked cargo van.

Or maybe you lost your job due to the coronavirus and that fateful day in 2019 when 1 bat fucked that other bat.

Either way you're saddled with debt right now and you're looking for a fresh start.

Lest that is your debt is student loans in which case you should think about faking your own death because odds are you're as fucked as this bat.

Under current bankruptcy law, you're required to complete this credit counselling course.

And the key thing I'm here to tell you is, there are 2 main kinds of personal bankruptcy.

Chapter 7, that's the thing you think of as bankruptcy, where typically most of your debts can be discharged, and Chapter 13, which you might assume works similarly, though Anyone who's been through it knows that it doesn't.

And if all this seems needlessly confusing, it's because it is.

The whole system is currently designed to be so discouraging that eventually you say fuck it and give up.

So instead of watching a condescending series of videos about how to make a budget.

Why don't we both make better use of this time and enjoy this video of a man feeding a pack of raccoons individual hot dogs.

Look, filing for bankruptcy will never be as enjoyable as a raccoon eating a hot dog.

But at the very least, it should be that simple.

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Bankruptcy: Last Week Tonight with John Oliver (HBO)