Health care reform, foreign conflicts and industry bailouts have gained the political spotlight for the past year, while American citizens struggle to maintain their homes and jobs in a weak economy. Many look to our nation's leaders and legislators for solutions. However, some of our federal lawmakers are suffering the same financial frustrations as the general public. This is most evident in the recent report regarding eight-term Texas Democrat Ruben Hinojosa, who filed for Chapter 11 bankruptcy protection in December 2010.
Hinojosa's financial woes, per his federal filings, include $2.9 million in liabilities, a majority of it owed to one of the nation's largest lenders, Wells Fargo Bank. Formerly active in the family business, H & H Meat Products Company (H & H), Hinojosa, who is a House Financial Services Committee member, has struggled to repay a personal obligation for H & H.
Bankruptcy is a legal remedy open to all consumers seeking to repay or be relieved of debt. Given past federal reforms, strict regulations and specialized bankruptcy courts govern the proceeding. Individuals generally seek protection under Chapter 7 and Chapter 13, but individuals with significant assets, as well as debts, can also file for Chapter 11 Reorganization, which is generally seen as a business/corporate remedy.
In 2009, 1.4 million bankruptcy petitions were filed in the United States. Fewer than one percent were Chapter 11 cases. Of these cases, approximately 10 percent were non-business-related filings. In general, bankruptcy filings are on the rise, with Chapter 11 filings almost doubling.
Filing bankruptcy has many benefits. The most significant is the automatic stay, which prevents creditors from pursuing collection-related actions. Bankruptcy also aids consumers in either eliminating or minimizing existing debt. Fresh financial starts are another benefit of filing bankruptcy. Some families are able to establish and maintain financial stability as a result of bankruptcy. While it will negatively impact credit scores, it does not preclude a family from obtaining credit or rebuilding their credit in the future.
In decades past, bankruptcy was akin to financial leprosy. Today, public attitudes are changing due to of our nation's economic downturn. As Americans continue to worry about inflation, high jobless rates and oppressive debt, they must consider all the options that protect their families, property and interests in these tough financial times.
